This study investigates the effects of accounting bias on the efficiency of a debt- financed investment, which is subject to an interim liquidation/continuation decision based on the accounting report. We decompose the overall effect of accounting bias into a mean effect and a variance effect...

We investigate how a social planner designs cycle-turn-contingent regulatory lever- age ratios under CECL accounting to maximize the ex ante joint surplus of a bank’s debtholders and equityholders. We highlight cycle-related parameters associated with two sides of banks’ balance sheets: a...