Impact of Loan Porfolio Composition on Accounting Conservatism in the Banking Industry
Date Issued
2007
Date
2007
Author(s)
CHIEN, I-CHI
DOI
en-US
Abstract
Basu (1997) predicts and provides evidence that bad news is incorporated in earnings faster than good news, resulting in negative earnings changes being less persistent than positive earnings changes. This study extends the Baus’s model to examine (1) the effect of conservatism measures on timeliness and asymmetric timeliness, (2) the influence of loan composition on asymmetric timeliness, and (3) the interacting effect of conservatism measures and loan composition on asymmetric timeliness in the US banking industry. We also test the effect under different periods and sub-sample. The measures of conservatism we choose are (1) the ratio of allowance for loan losses to non-performing assets, (2) the ratio of allowance for loan losses to the net write-off, and (3) the market-to-book ratio. Furthermore, our empirical results show that compositions of bank loan portfolios have significant impact on asymmetric timeliness. Banks with more heterogeneous loans are more likely to overstate the provisions in the boost period, and to delay the provisions in the bust period.
Subjects
穩健原則
放款組合
銀行業
壞帳費用
不對稱性
異質性放款
Accounting conservatism
Loan portfolio
Banking industry
Provision
Asymmetric timeliness
Heterogeneous loans
Type
other