The Experts below are selected from a list of 46263 Experts worldwide ranked by ideXlab platform
Francis A Longstaff - One of the best experts on this subject based on the ideXlab platform.
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the market risk premium for unsecured consumer credit risk
National Bureau of Economic Research, 2020Co-Authors: Matthias Fleckenstein, Francis A LongstaffAbstract:We use the prices of credit card asset-backed securities to study the market risk premium associated with unsecured consumer credit risk. The consumer credit risk premium has historically been comparable to high yield corporate bond spreads, but has increased dramatically since the financial crisis. We find evidence that this increase is primarily due to balance-sheet costs imposed by recent changes in Regulatory Capital requirements which have effectively placed credit card securitizations back onto issuer balance sheets. These changes in Capital regulation may have added hundreds of basis points to the cost of unsecured household credit.
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the market risk premium for unsecured consumer credit risk
Social Science Research Network, 2020Co-Authors: Matthias Fleckenstein, Francis A LongstaffAbstract:We use the prices of credit card asset-backed securities to study the market risk premium associated with unsecured consumer credit risk. The consumer credit risk premium has historically been comparable to high yield corporate bond spreads, but has increased dramatically since the financial crisis. We find evidence that this increase is primarily due to balance-sheet costs imposed by recent changes in Regulatory Capital requirements which have effectively placed credit card securitizations back onto issuer balance sheets. These changes in Capital regulation may have added hundreds of basis points to the cost of unsecured household credit. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
Kevin T Jacques - One of the best experts on this subject based on the ideXlab platform.
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procyclicality bank lending and the macroeconomic implications of a revised basel accord
The Financial Review, 2010Co-Authors: Kevin T JacquesAbstract:Bank regulators are in the process of implementing revised Regulatory Capital standards. However, the macroeconomic effects of a revised Basel Accord are uncertain. Examining the various channels through which the revised Accord may influence economic output suggests that making the buffer stock of Capital positively related to the business cycle is necessary to reduce procyclicality. This can be accomplished by bank regulators using either enhanced supervisory powers or increased financial disclosure.
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Capital shocks bank asset allocation and the revised basel accord
Review of Financial Economics, 2008Co-Authors: Kevin T JacquesAbstract:In contrast to the 1988 Basel Accord (Basel I), the revised risk-based Capital standards (Basel II) propose Regulatory Capital requirements based on credit ratings. This paper develops a theoretical model to analyze how banks will adjust their low and high credit risk commercial loans under the proposed newer standard. Capital-constrained banks respond to an adverse Capital shock by reducing high credit risk loans, while under certain circumstances, low credit risk loans may actually increase. When compared to Basel I, it is shown that high-risk loans are reduced more under Basel II, but whether a bank reduces total lending more under Basel I or under the revised standards depends on a complex interaction of factors.
Anne Beatty - One of the best experts on this subject based on the ideXlab platform.
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financial accounting in the banking industry a review of the empirical literature
Journal of Accounting and Economics, 2014Co-Authors: Anne Beatty, Scott LiaoAbstract:Abstract We survey research on banks׳ financial accounting. After providing a brief background of the theoretical models and accounting and Regulatory institutions underlying the bank accounting literature, we review three streams of empirical research. Specifically we review studies associating bank financial reporting with the valuation and risk assessments, associating bank financial reporting discretion with Regulatory Capital and earnings management, and examining banks’ economic decisions under differing accounting regimes. We discuss what we have already learned and about what else we would like to know. We also discuss methodological challenges associated with predicting the effects of alternative accounting and Regulatory Capital regimes.
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financial accounting in the banking industry a review of the empirical literature
Social Science Research Network, 2013Co-Authors: Anne Beatty, Scott LiaoAbstract:We survey research on financial accounting in the banking industry. After providing a brief background of the micro-economic theories of the economic role of banks, why bank Capital is regulated, and how the accounting regime affects banks’ economic decisions, we review three streams of empirical research. Specifically we focus on research examining the relation between bank financial reporting and the valuation and risk assessments of outside equity and debt, the relation between bank financial reporting discretion, Regulatory Capital and earnings management, and banks’ economic decisions under differing accounting regimes. We provide our views about what we have learned from this research and about what else we would like to know. We also provide some empirical analyses of the various models that have been used to estimate discretion in the loan loss provision. We further discuss the inherent challenges associated with predicting how bank behavior will respond under alternative accounting and Regulatory Capital regimes.
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managing financial reports of commercial banks the influence of taxes Regulatory Capital and earnings
Social Science Research Network, 1998Co-Authors: Anne Beatty, Sandra Chamberlain, Joseph MaglioloAbstract:This paper examines whether managerial discretion over loan loss accruals, accounting related transactions such as sales of investment securities, and financing transactions are used to manage Capital, earnings or taxes. We model discretion over these decisions using a system of five equations generating from an underlying cost minimization problem. The estimated parameters of the system suggest that banks manage both Capital and earnings using accounting, investment and financing discretion exercised over these transactions. The framework we use highlights trade-offs among accounting and financing transactions. We find that accounting sources of Capital in part determine banks' propensity to issue new securities and that the positive reported Capital effects of gains from transactions such as asset sales in part determine managers' willingness to charge-off loans.
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managing financial reports of commercial banks the influence of taxes Regulatory Capital and earnings
Journal of Accounting Research, 1995Co-Authors: Anne Beatty, Sandra Chamberlain, Joseph MaglioloAbstract:This paper investigates how banks alter the timing and magnitude of transactions and accruals to achieve primary Capital, tax, and earnings goals. Recent research, including Moyer [1990], Scholes, Wilson, and Wolfson [1990], and Collins, Shackelford, and Wahlen [1995], provides evidence that banks execute transactions and manage accruals to achieve some or all of these objectives. A common feature of these studies is the assumption that when managers make a particular accrual or transaction decision, all other decisions are fixed. We relax this assumption and allow such decisions to be determined simultaneously.
Peter D Easton - One of the best experts on this subject based on the ideXlab platform.
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a convenient scapegoat fair value accounting by commercial banks during the financial crisis
The Accounting Review, 2012Co-Authors: Brad A Badertscher, Jeffrey J Burks, Peter D EastonAbstract:ABSTRACT: Critics argue that fair value provisions in U.S. accounting rules exacerbated the recent financial crisis by depleting banks' Regulatory Capital, which curtailed lending and triggered asset sales, leading to further economic turmoil. Defenders counter-argue that the fair value provisions were insufficient to lead to the pro-cyclical effects alleged by the critics. Our evidence indicates that these provisions did not affect the commercial banking industry in the ways commonly alleged by critics. First, we show that fair value accounting losses had minimal effect on Regulatory Capital. Then, we examine sales of securities during the crisis, finding mixed evidence that banks sold securities in response to Capital-depleting charges. However, the sales that potentially resulted from the charges appear to be economically insignificant, as there was no industry- or firm-level increase in sales of securities during the crisis. JEL Classifications: M41; M42; M44. Data Availability: Data are available fro...
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a convenient scapegoat fair value accounting by commercial banks during the financial crisis
Social Science Research Network, 2010Co-Authors: Brad A Badertscher, Jeffrey J Burks, Peter D EastonAbstract:Critics argue that the “fair value” provisions in U.S. accounting rules exacerbated the recent financial crisis by depleting banks’ Regulatory Capital, which curtailed lending and triggered asset sales, leading to further economic turmoil. Defenders counter-argue that the role of fair value in U.S. accounting rules is insufficient to lead to the pro-cyclical effects alleged by the critics; they point out that most bank assets are not fair valued, and the assets that are fair valued likely have little effect on Regulatory Capital, especially when banks do not intend to sell the assets at low prices. Our empirical evidence indicates that fair value provisions in U.S. accounting rules did not affect the commercial banking industry in the ways commonly alleged by critics. We show that fair value accounting losses had minimal effect on Regulatory Capital, and there is no evidence of increased selling of securities during the crisis.
Hitoshi Inoue - One of the best experts on this subject based on the ideXlab platform.
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the emergence of a parallel world the misperception problem for bank balance sheet risk and lending behavior
Social Science Research Network, 2019Co-Authors: Hitoshi Inoue, Kiyotaka Nakashima, Koji TakahashiAbstract:We examine the reason why two opposing views on distressed banks' lending behavior in Japan's postbubble period have coexisted: one is stagnant lending in a Capital crunch and the other is forbearance lending to low-quality borrowers. To this end, we address the measurement problem for bank balance sheet risk. We identify the credit supply and allocation effects of bank Capital in the bank loan equation specified at the loan level, thereby finding that the "parallel worlds", or the two opposing views, emerge because the Regulatory Capital does not reflect the actual condition of increased risk on bank balance sheets, while the market value of Capital does. By uncovering banks' efforts to increase Regulatory Capital in Japan's postbubble period, we show that banks with low market Capitalization, and which had difficulty in building up adequate equity Capital for their risk exposure, decreased the overall supply of credit. Parallel worlds can emerge whenever banks are allowed to overvalue assets at their discretion, as in Japan' postbubble period.
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the emergence of a parallel world the misperception problem for bank balance sheet risk and lending behavior
MPRA Paper, 2018Co-Authors: Hitoshi Inoue, Kiyotaka Nakashima, Koji TakahashiAbstract:We examine the reason that there have coexisted the two opposing views on distressed banks' lending behavior in Japan's post-bubble period: the one is the stagnant lending in a Capital crunch and the other is the forbearance lending to low-quality borrowers. To this end, we address the measurement problem for bank balance sheet risk. We identify the credit supply and allocation effects of bank Capital in the bank loan equation specified at loan level, thereby finding that the ``parallel worlds'', or the two opposing views, emerge because the Regulatory Capital does not reflect the actual condition of increased risk on bank balance sheet, while the market value of Capital does. By uncovering banks' engagement in patching-up of the Regulatory Capital in the Japan's post-bubble period, we show that lowly market Capitalized banks that had difficulty in building up adequate equity Capital for their risk exposure decreased the overall supply of credits. The parallels world can emerge whenever banks are allowed to overvalue assets with their discretion, as in Japan' post-bubble period.
