Accounting for financial stability: Bank disclosure and loss recognition in the financial crisis


Bischof, Jannis ; Laux, Christian ; Leuz, Christian



URL: https://www.accounting-for-transparency.de/wp-cont...
Additional URL: https://www.accounting-for-transparency.de/de/publ...
Document Type: Working paper
Year of publication: 2020
The title of a journal, publication series: Working Paper Series
Volume: 32
Place of publication: Mannheim [u.a.]
Publishing house: SFB/Transregio 266
Publication language: English
Institution: Business School > ABWL u. Unternehmensrechnung (Bischof 2015-)
Subject: 330 Economics
650 Management
Abstract: This paper examines banks’ disclosures and loss recognition in the financial crisis and identifies several core issues for the link between accounting and financial stability. Our analysis suggests that, going into the financial crisis, banks’ disclosures about relevant risk exposures were relatively sparse. Such disclosures came later after major concerns about banks’ exposures had arisen in markets. Similarly, the recognition of loan losses was relatively slow and delayed relative to prevailing market expectations. Among the possible explanations for this evidence, our analysis suggests that banks’ reporting incentives played a key role, which has important implications for bank supervision and the new expected loss model for loan accounting. We also provide evidence that shielding regulatory capital from accounting losses through prudential filters can dampen banks’ incentives for corrective actions. Overall, our analysis reveals several important challenges if accounting and financial reporting are to contribute to financial stability.

Dieser Eintrag ist Teil der Universitätsbibliographie.




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