The Impact of Reserves Practices on Bank Opacity

Giuliano Iannotta and Simon Kwan

No 2013-35, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: Using a banking firm?s unexpected loan loss provision to proxy for earnings management, it is found to have a significantly positive effect on bank opacity. The explanatory power of earnings management on bank opacity is stronger during the pre-crisis period than during the 2007-2009 financial crisis. When we examine the effects of delays in loan loss recognition on bank opacity, we found strong statistical relations during the financial crisis period, while the results for the pre-crisis period are mixed. We conclude that bank opacity is related to unexpected loan loss provision as well as delays in loan loss recognition.

Keywords: Bank opacity; loan loss reserve; delays in loss recognition (search for similar items in EconPapers)
JEL-codes: G21 G30 G34 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2013
New Economics Papers: this item is included in nep-ban
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: THE IMPACT OF RESERVES PRACTICES ON BANK OPACITY (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfwp:2013-35

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DOI: 10.24148/wp2013-35

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