This paper presents evidence of banks using accounting discretion to overstate the value of distressed assets. In particular, we show that the stock market applies far greater discounts to a bank’s real estate loans and mortgage-backed securities than are implicit in the book values of these...

In the context of the global market for syndicated bank loans, we provide evidence that the collapse of international markets during financial crises can in part be explained by a flight home effect. We show that the home bias of lenders’ loan origination increases by approximately 20 percent...