Delayed Expected Loss Recognition and the Risk Profile of Banks

@inproceedings{Bushman2011DelayedEL,
  title={Delayed Expected Loss Recognition and the Risk Profile of Banks},
  author={Robert M. Bushman and Kenan-Flagler},
  year={2011}
}
  • Robert M. Bushman, Kenan-Flagler
  • Published 2011
Policy makers and regulators argue that loan loss accounting can potentially reinforce procyclical effects of bank capital regulation. Banks that delay recognition of expected loan losses (DELR) create an overhang of unrecognized expected losses that carry forward to future periods. Further, we hypothesize that DELR can reduce bank transparency, increasing investors’ uncertainty about a bank’s intrinsic value and impeding the bank’s ability to raise equity capital in downturns. Expected loss… CONTINUE READING
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