This paper examines banks' accounting choices between fair-value and historical-cost accounting when reported accounting information is used for capital requirement regulation. In choosing fair-value relative to historical-cost, banks must consider potential benefits of additional lending in...

We study the implications of accounting information quality on banks' risk-taking behavior. We show that the accounting information precision has a non-monotonic effect on banks' risk-taking decisions. Surprisingly, when information precision is low, an improvement in precision actually induces...