Journals
Journal:
JOURNAL OF ACCOUNTING AND PUBLIC POLICY
ISSN:
0278-4254
Year:
2023
Vol.:
42
N°:
4
pp.
107097
This paper provides early descriptive evidence on the effect of the adoption of IFRS 9 and COVID19 on banks' lending and regulatory capital. Using a sample of Spanish quoted banks, we find that the implementation of IFRS 9 resulted in an increase in the timeliness of loan loss recognition, and it only had a negative effect on lending for small banks that are timelier in recognizing expected credit losses. Timelier banks, large and small, increased their Tier 1 regulatory capital after the implementation of IFRS 9, although larger banks to a greater extent. Despite the extraordinary economic stimulus measures taken during the COVID-19 shock, there is a reduction in lending for small banks that are timelier in recognizing expected credit losses, and an increase in Tier 1 capital for timelier large banks. These results are not inconsistent with IFRS 9 having some procyclical traits, as it is not possible to anticipate truly unexpected shocks like COVID-19. The fact that IFRS 9 is more forward looking than its predecessor IAS 39, and that the observed effects are mild suggests that IFRS 9 is likely less procyclical than IAS 39.
Journal:
ANNALS OF PUBLIC AND COOPERATIVE ECONOMICS
ISSN:
1370-4788
Year:
2022
Vol.:
93
N°:
4
pp.
849 - 885
In this paper, we analyze whether credit unions are subject to market discipline by their (member) depositors and examine the drivers of such discipline. We first provide descriptive evidence of depositor discipline in credit unions: shares and deposits as well as savings interest rates react to variables that reflect the financial health of the credit union and its asset risk. We show that this discipline is long-lasting and that it is mediated by the existence of a deposit guarantee scheme and by the strength of the relationship of members with the credit union. We then use proxies of the capability of members to process financial information to show that discipline is heavily influenced by member financial sophistication. Our results suggest that a type of market-based discipline acts as a complement for regulation in controlling credit union risk taking, thus contributing to overall financial stability.
Journal:
BANCO DE ESPAÑA. DOCUMENTO DE TRABAJO
ISSN:
1579-8666
This paper studies firm-level factors shaping the enforcement of financial reporting regulation on private non-financial firms and propose bank lending as a particularly important one. Our tests are based on a rare combination of datasets, which allows us to construct unique measures of misreporting, notably underreporting of debt. We observe that firms with bank debt are more likely to file mandatory financial reports and less likely to file information with irregularities. While we also find evidence that the need for bank financing can induce firms to misreport, this concern is mitigated by additional tests suggesting that banks detect reporting issues at firms¿ financial statements. Critically, we observe that firms with reporting issues obtain significantly less credit, especially when the bank has previous exposure to debt misreporting and when the bank verifies debt information using the public credit registry. Collectively, our paper documents important firm-level determinants of private non-financial firms¿ misreporting and highlight that banks play a significant role in the enforcement of mandatory financial reporting on these firms
Journal:
JOURNAL OF ACCOUNTING RESEARCH
ISSN:
0021-8456
Year:
2021
Vol.:
59
N°:
3
pp.
757 - 804
This paper provides early evidence on the effect of global regulation mandating a switch from loan loss provisioning (LLP) based on incurred credit losses (ICLs) to LLP based on expected credit losses (ECLs). Using a sample of systemically important banks from 74 countries, we find that ECL provisions are more predictive of future bank risk than ICL provisions. Corroborating that the switch to ECL provisioning results in more information to assess bank risk, we also observe that the announcement of a larger first-time impact of the accounting change elicits lower stock returns and higher changes in credit default swap spreads. Critically, these patterns are most pronounced when credit conditions deteriorate. Additional analyses show that the higher information content of the ECL model stems from the provisions for nondefaulted loans, which did not exist under ICL. Our study contributes to the debate on the effect of the ECL model on procyclicality, an especially pressing issue in the context of the current pandemic.
Journal:
JOURNAL OF FINANCIAL STABILITY
ISSN:
1572-3089
Year:
2021
Vol.:
56
pp.
100932
US credit unions have been subject to a strict regulation of their commercial lending which included both requirements for enhanced organizational practices and a cap on the proportion of business loans relative to assets (imposed in 1998 by US Congress). Since 2003, however, these limitations have been steadily relaxed, a process which has resulted in an increase in credit union business lending activity. Using data from the universe of US credit unions we provide comprehensive evidence that expansion of the business loan portfolio increases the risk of the asset side of the credit union. This is the case even for credit unions which benefit from partnership with the SBA, for which we observe an initial increase in the risk of non-SBA backed loans (an overconfidence effect) which reverses over time (a learning effect). Our results suggest, furthermore, that the risk of business loans is exacerbated for credit unions which initiate their business loan activity and which do so rapidly. In the second part of our analysis we provide descriptive and quasi-experimental evidence that expansions of credit union activity into business loans are associated with lower subsequent growth rates of deposits. This result is similar to the reaction to risk indicators found in the banking literature and might give an ex-ante incentive for the CU that could work as a market-based stabilization mechanism complementary to that of explicit regulation.
Authors:
Barth M.; Gómez-Biscarri, J.; Kasznik, R.; et al.
Journal:
REVIEW OF ACCOUNTING STUDIES
ISSN:
1380-6653
Year:
2017
Vol.:
22
N°:
4
pp.
1761 - 1792
Based on a large sample of publicly listed and non-listed US commercial banks from 1996 to 2011, we find robust evidence consistent with banks using realized available for sale (AFS) securities gains and losses to smooth earnings and increase low regulatory capital. We also find that (i) banks with positive earnings smooth earnings, and banks with negative earnings generally take big baths; (ii) regulatory capital constrains big baths; (iii) banks with more negative earnings and more unrealized beginning-of-quarter losses (gains) take big baths (smooth earnings); and (iv) banks with low regulatory capital and more unrealized gains realize more gains. Also, banks with negative earnings take big baths (avoid or reduce the earnings loss) if their unrealized gains are insufficient (sufficient) to offset the negative earnings. Our inferences apply to listed and non-listed banks, which indicates that the earnings management incentives do not derive solely from public capital markets. Our findings reveal that the accounting for AFS securities gains and losses enables banks to manage regulatory capital and earnings in a variety of ways.
Journal:
JOURNAL OF INTERNATIONAL MONEY AND FINANCE
ISSN:
0261-5606
Year:
2017
Vol.:
79
pp.
174 - 188
We provide a new measure of sovereign country risk exposure (SCRE) to global sovereign tail risk based on information incorporated in 5-year sovereign CDS spreads. Our panel regressions with quarterly data from 53 countries show that macro risks have strong explanatory power for SCRE. Results show that SCRE increases for countries with less fiscal space, higher interest rates, and financial stability concerns. Exposure sensitivity to public sector leverage is shown to increase non-linearly with public debt and to decrease with central banks' sovereign debt programs. Our results imply that good forward-looking macro-finance fundamentals, such as high expected GDP growth and low credit-to- GDP ratios protect countries against sovereign risk especially in times of global distress. (C) 2017 Elsevier Ltd. All rights reserved.
Journal:
JOURNAL OF FINANCIAL INTERMEDIATION
ISSN:
1042-9573
Year:
2017
Vol.:
31
pp.
16 - 29
This paper empirically characterizes relationship lending using data from more than 20,000 loans of a Spanish bank to small and medium enterprises (SMEs). The study analyzes the pricing determinants of loans to firms based on the entire previous bank-firm relationship, allowing for the identification of non-linear pricing patterns in the bank-firm relationship. We show that firms only start capitalizing the gains of relationship lending when the relationship extends beyond two years. This reduction in the loan rate spread charged is driven by the opaque firms, for which the acquisition of "soft" information is especially relevant. Finally, we find that relationship lending significantly mitigates the increased costs of refinancing loans along two dimensions: relationship duration and having additional contracts-other than loans-with the bank. (C) 2016 Elsevier Inc. All rights reserved.
Journal:
FINANCE RESEARCH LETTERS
ISSN:
1544-6123
Year:
2015
Vol.:
15
pp.
49 - 58
Building on the concept of Granger causality in risk in Hong et al. (2009), and focusing on an international sample of large-capitalization banks, we test for predictability in comovements in the left tails of returns of individual banks and the global system. The main results show that large individual shocks (defined as balance-sheet contractions exceeding the 1% VaR level) are a strong predictor of subsequent shocks in the global system. This evidence is particularly strong for US banks with large desks of proprietary trading. Similarly, we document strong evidence of financial vulnerabilities (exposures) to systemic shocks in US subprime creditors.
Journal:
JOURNAL OF BANKING AND FINANCE
ISSN:
0378-4266
Year:
2015
Vol.:
58
pp.
471 - 485
Journal:
EUROPEAN FINANCIAL MANAGEMENT
ISSN:
1354-7798
Year:
2014
Vol.:
20
N°:
4
pp.
825 - 855
This paper compares the efficiency of mutual funds that charge management fees based totally or partially on returns (performance) with those that charge them exclusively on assets under management. We analyse Spanish risky mutual funds during 1999¿2009 for which both types of management fees are authorised. We find that performance¿based fee funds perform significantly better than the other risky funds considered. Moreover, a strongly positive performance¿expenses relation is found for such funds, and negative for the other. These results seem to indicate more efficient management in performance¿based fee funds, in contrast with their low presence in the fund industry.
Journal:
JOURNAL OF FINANCIAL STABILITY
ISSN:
1572-3089
Year:
2013
Vol.:
9
N°:
3
pp.
287 - 299
We analyze a sample of large international banks in major advanced economies and examine the impact that bank-specific factors have on an institution's solvency risk and its contribution to systemic risk. We focus on the five categories that the Basel Committee on Banking Supervision has recently proposed as indicators of systemic importance. Our findings suggest that unstable funding is the main factor driving systemic risk. Furthermore, the combination of significant trading activities with global presence appears to exacerbate spillover risks to the global financial system. Interestingly, whereas trading activities contribute to the build-up of correlated or `wrong-way¿ risk they help to mitigate individual solvency risk. Conversely, a decentralized approach to liquidity management seems to alleviate individual solvency risk but amplifies the transmission of financial distress across the financial system. This suggests that a macro-prudential approach to financial regulation should focus not only on scaling up micro-prudential measures but also on enabling the efficient transfer of risk between financial institutions.
Journal:
JOURNAL OF BANKING AND FINANCE
ISSN:
0378-4266
Year:
2013
Vol.:
37
N°:
12
pp.
5186 - 5207
Several studies have analyzed discretionary accruals to address earnings-smoothing behaviors in the banking industry. We argue that the characteristic link between accruals and earnings may be nonlinear, since both the incentives to manipulate income and the practical way to do so depend partially on the relative size of earnings. Given a sample of 15,268 US banks over the period 1996¿2011, the main results in this paper suggest that, depending on the size of earnings, bank managers tend to engage in earnings-decreasing strategies when earnings are negative (¿big-bath¿), use earnings-increasing strategies when earnings are positive, and use provisions as a smoothing device when earnings are positive and substantial (¿cookie-jar¿ accounting). This evidence, which cannot be explained by the earnings-smoothing hypothesis, is consistent with the compensation theory. Neglecting nonlinear patterns in the econometric modeling of these accruals may lead to misleading conclusions regarding the characteristic strategies used in earnings management.
Journal:
ACCOUNTING HORIZONS
ISSN:
0888-7993
Year:
2012
Vol.:
26
N°:
4
pp.
767 - 787
The IASB/FASB joint project on Financial Instruments with Characteristics of Equity (formerly Liabilities and Equity) has highlighted the complexity and the associated difficulty of drawing the line between liabilities and equity. While classification difficulties have been identified for investor-owned businesses (IOB), the inconsistency of the different approaches being considered is clearer when applied to classification of the financial instruments of co-operatives whose ownership characteristics differ from the IOB model. In co-operatives the existence of an upper limit on members' claims on the net assets while the co-operative is a going concern is a key ownership characteristic. We have examined the characteristics of co-operative member shares in six European countries as well as in the U. S. and in Canada, in order to analyze the application of the various classification approaches under discussion by the IASB and FASB. The results of this analysis indicate that classification criteria based on ownership must take account of the fact that ownership is multidimensional and contingent on the type of firm
Journal:
JOURNAL OF BANKING AND FINANCE
ISSN:
0378-4266
Year:
2012
Vol.:
36
N°:
12
pp.
3150 - 3162
We use the CoVaR approach to identify the main factors behind systemic risk in a set of large international banks. We find that short-term wholesale funding is a key determinant in triggering systemic risk episodes. In contrast, we find weaker evidence that either size or leverage contributes to systemic risk within the class of large international banks. We also show that asymmetries based on the sign of bank returns play an important role in capturing the sensitivity of system-wide risk to individual bank returns. Since short-term wholesale funding emerges as the most relevant systemic factor, our results support the Basel Committee¿s proposal to introduce a net stable funding ratio, penalizing excessive exposure to liquidity risk.
Journal:
JOURNAL OF INTERNATIONAL MONEY AND FINANCE
ISSN:
0261-5606
Year:
2011
Vol.:
30
N°:
6
pp.
1214-1233
Journal:
REVIEW OF QUANTITATIVE FINANCE AND ACCOUNTING
ISSN:
0924-865X
Year:
2011
Vol.:
37
N°:
2
pp.
245-265
The main purpose of this paper is to deal with the analysis of the scale effect in the value-relevance of accounting numbers. We examine the impacts of widely used deflators on the adjustment of scale effect. We find that most of the usual deflators employed in the literature generate endogeneity problems. In this paper we recommend the use of exogenous deflator such as the number of employees in market-based accounting research models. This alternative deflator produces, at least for the USA and Canada data, slightly better statistical results than other (endogenous) deflators such as the market value, the book value of equity, or the total assets.
Journal:
FINANCE A UVER-CZECH JOURNAL OF ECONOMICS AND FINANCE
ISSN:
0015-1920
Year:
2010
Vol.:
60
N°:
5
pp.
426-446
The interpretation of the Fama and French SMB and HML factors (Fama and French, 1993) as risk factors is an unresolved question that has carried a lot of controversy in the asset-pricing literature and it is far from being solved The aim of this study is to contribute to the understanding of this issue by analyzing a rational pricing explanation of this model in the Spanish stock market. There is no empirical evidence concerning the relation between returns and fundamentals in this capital market, therefore it is necessary to study this relation in order to evaluate whether the use of this model is supported by a rational pricing explanation in non-U.S. markets. Following the Fama and French (1995) approach we analyze whether there are size and book-to-market factors in fundamentals similar to those observed in returns and whether these factors in fundamentals drive stock returns. Our results show that there are factors in fundamentals similar to those observed in returns. Secondly, when return on capital is used as a proxy for fundamentals, factors in fundamentals drive factors in returns. Therefore, return on capital is a useful fundamental variable used by investors in the Spanish stock market. These results give support to the use of this model in the Spanish capital market.
National and regional funding
Title:
La influencia de los incentivos, la disciplina, la educación financiera y la banca digital sobre la estabilidad financiera
Project reference:
ECO2016-78254-P
Principal Investigator:
Germán López Espinosa
Funding organisation:
MINISTERIO DE CIENCIA, INNOVACIÓN Y UNIVERSIDADES
Programme/Call:
2016 MINECO EXCELENCIA. PROYECTOS I+D
Starting date:
30/12/2016
Ending date:
29/12/2019
Amount awarded:
31.460,00€
Other Funds:
Fondos FEDER
Title:
Finanzas y Contabilidad para ESG
Project reference:
PID2022-136451NB-I00
Principal Investigator:
Germán López Espinosa, María del Carmen Aranda León
Funding organisation:
AGENCIA ESTATAL DE INVESTIGACION
Programme/Call:
2022 AEI Proyectos de Generación del Conocimiento
Starting date:
01/09/2023
Ending date:
31/08/2026
Amount awarded:
105.750,00€
Other Funds:
Fondos FEDER
Title:
Los factores que afectan a la asunción de riesgos en el sistema financiero
Project reference:
PID2019-105227RB-I00
Principal Investigator:
Javier Ignacio Arellano Gil, Germán López Espinosa
Funding organisation:
MINISTERIO DE CIENCIA, INNOVACIÓN Y UNIVERSIDADES
Programme/Call:
2019 AEI PROYECTOS I+D+i (incluye Generación del conocimiento y Retos investigación)
Starting date:
01/06/2020
Ending date:
31/05/2023
Amount awarded:
29.161,00€
Other Funds:
Fondos FEDER
