This paper examines the impact of cross-border acquisition announcements on the U.S. bidders’ credit risk. On average, we find a significant increase in bidders’ rating-adjusted credit default swap (CDS) spreads around an acquisition announcement in an emerging market (EM), but no marked...

Banking regulation and supervision have a key role to play in realising the EU’s climate change objectives. In this article we analyse the EU-level initiatives currently underway to green the banking system, in particular with regard to the microprudential rulebook. We document how regulators...

In this paper we aim to provide a holistic understanding of the Initial Margin (IM) models used by Central Counterparties (CCPs) in Europe. In addition to discussing their relevance in terms of CCP risk management and their importance for the functioning of financial markets, we provide an...

We examine the impact on a firm when it is exogenously forced to switch its bank relationship from one branch to another branch of the same bank. We show the effect depends directly on the relative balance between the hard accounting information provided to the bank by the firm, as part of the...

One objection to fair value accounting for liabilities is that changes in a company’s credit risk are recognized as gains or losses in a manner that is counterintuitive to the way gains and losses are typically interpreted (Lipe 2002). Specifically, when a company’s credit risk increases...

Lenders can transfer credit risk by purchasing credit default swaps (CDS), but holding swaps can diminish their incentives to monitor borrowers. Contracting theory predicts that lenders demand conservatism, in particular asymmetric timeliness of loss recognition, to effectively monitor...

This paper investigates whether the initiation of trading in credit default swaps (CDSs) on a borrowing firm's outstanding debt is associated with a decline in that firm's reporting conservatism. CDS investments can modify lenders' payoffs on their loan portfolios by providing insurance on...

Standard setters and many investors argue that loan fair values provide more useful information about credit losses than historical cost information while bankers and others generally disagree. We examine the ability of reported loan fair values to predict credit losses relative to the ability...

The recent change in financial reporting for lease obligations provides an opportunity to assess whether the new disclosures improve the information environment available for credit risk assessments and decision-making. Comparisons of newly reported capitalized operating leases, weighted average...

We examine the impact of SFAS 133, Accounting for Derivative Instruments and Hedging Activities, on the reporting behavior of commercial banks and the informativeness of their financial statements. We argue that, because mandatory recognition of hedge ineffectiveness under SFAS 133 reduced...