Mandatory Consolidation and Stock Price Crash Risk: Evidence from the U.S. Bank Holding Companies
Other Title
強制性合併與股價崩盤風險：美國控股銀行的證據
Journal
中華會計學刊
Journal Volume
19
Journal Issue
2
Start Page
285
End Page
325
ISSN
1609-3372
Date Issued
2023-12
Abstract
We investigate whether bank securitization activities are associated with opacity and, thus, future stock price crash risk and whether the mandatory changes in consolidation and disclosure requirements for qualifying special purpose entities (QSPEs hereafter) in accordance with SFAS 166/167 in the U.S. are associated with banks' opacity and future stock price crash risk. Consistent with the notion that complex off-balance-sheet securitizing transactions increase bank opacity and provide more room for bank executives to hoard bad news, we find that U.S. bank holding companies with a higher prevalence of securitization engagement are associated with higher future stock price crash risks. Moreover, we argue that the consolidation of QSPEs required under SFAS 166/167 reveals previously hidden assets, liabilities, revenues, etc., making securitizing activities more transparent. We document that the regulatory changes of SFAS 166/167 in enhanced disclosure and the consolidation of previous off-balance-sheet activities effectively decrease stock price crash risk.
Subjects
special purpose entity (SPE)
SFAS 166/167
securitization
stock price crash risk
Type
journal article