This paper investigates Japanese bank managers' use of the discretionary component of loan loss provisions to manage earnings during the recession of the late 1990s. Although studies of US banks document that bank managers use loan loss provisions to smooth earnings, manage regulatory capital,...

This paper investigates whether and how the initiation of Credit Default Swaps (CDS) trading affects analyst optimism. First, we document that analyst forecasts become less optimistic after the initiation of CDS trading. Second, we find that the dampening effect of CDS on analyst optimism is...

This study examines whether the quality of borrowers' accounting information affects the accuracy and timeliness of credit ratings issued by rating agencies. I consider two possible effects. The news effect posits that higher quality accounting provides better information to credit rating...

We use the EU stress tests and the Eurozone sovereign debt crisis to study the consequences of supervisory disclosure of banks' sovereign risk exposures. We test the idea that a mandatory one-time disclosure induces an increase in voluntary disclosures about sovereign risk in the following...

We investigate how provisioning models affect bank regulation. We study an accuracy vs. timeliness trade-off between an incurred loss model (IL) and a current expected credit loss model (CECL). Relative to IL, CECL improves efficiency by enabling timely intervention to curb inefficient ex post...

Prior research shows that banks have strong incentives to use loan loss provisions to smooth income. Using a sample of 878 US bank holding companies over the period 2001–2009, I find strong evidence of income smoothing behavior. Additionally, bank holding companies accelerate loan loss...

This paper empirically examine whether the way African banks use loan loss provisions to smooth earnings is influenced by capital market motivations and the type of auditor after controlling for non-discretionary determinants of loan loss provisions and fluctuations in the business cycle. The...

This study investigates the non-discretionary determinants of bank loan loss provisions in Africa after controlling for macroeconomic fluctuation, financial development and investor protection. We find that non-performing loans, loan-to-asset ratio and loan growth are significant...

Does enhancing banks' information sets and understanding of credit risks improve loan loss recognition? We study this question using a global dataset of staggered initiations and coverage increases of public credit registries (PCRs). Mandated by national regulators, PCRs collect borrower and...

Prior to 2018, accounting rules required banks that recognize financial liabilities at fair value to record unrealized gains and losses on the liabilities attributable to changes in the banks' own credit risk, referred to as the debt valuation adjustment (DVA), in earnings each period. Using a...