The Impact of Reserves Practices on Bank Opacity
Abstract: Using a banking firm?s unexpected loan loss provision to proxy for earnings management, it is found to have a significantly positive effect on bank opacity. The explanatory power of earnings management on bank opacity is stronger during the pre-crisis period than during the 2007-2009 financial crisis. When we examine the effects of delays in loan loss recognition on bank opacity, we found strong statistical relations during the financial crisis period, while the results for the pre-crisis period are mixed. We conclude that bank opacity is related to unexpected loan loss provision as well as delays in loan loss recognition.
File(s): File format is application/pdf http://www.frbsf.org/economic-research/files/wp2013-35.pdf
Provider: Federal Reserve Bank of San Francisco
Part of Series: Working Paper Series
Publication Date: 2014-07-01
Pages: 33 pages