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The RePEc plagiarism page Do delays in expected loss recognition affect banks' willingness to lend?Anne Beatty and Scott LiaoJournal of Accounting and Economics, 2011, vol. 52, issue 1, 1-20Abstract:Banks can decrease their future capital inadequacy concerns by reducing lending. The capital crunch theory predicts that lending is particularly sensitive to regulatory capital constraints during recessions, when regulatory capital declines and external-financing frictions increase. Regulators and policy makers argue that the current loan loss provisioning rules magnify this pro-cyclicality. Exploiting variation in the delay in expected loss recognition under the current incurred loss model, we find that reductions in lending during recessionary relative to expansionary periods are lower for banks that delay less. We also find that smaller delays reduce the recessionary capital crunch effect. These results hold across management quality partitions.Keywords: Loss; recognition; Lending; Banks; Capital; constraints; Pro-cyclicality (search for similar items in EconPapers)
Date: 2011
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Banks' limited knowledge about borrowers' creditworthiness constitutes an important friction in credit markets. Is this friction deeper in recessions, thereby contributing to cyclical swings in credit, or is the friction reduced, as bad times reveal information about firm quality? We test these alternative hypotheses using internal ratings data from a large Swedish cross-border bank and credit scores from a credit bureau. The ability to classify corporate borrowers by credit quality is greater during bad times and worse during good times. Soft and hard information measures both display countercyclical patterns. Our results suggest that information frictions in corporate credit markets are intrinsically countercyclical and not due to cyclical variation in monitoring effort. The presence of countercyclical information frictions provides a rationale for countercyclical provisions or capital in banks to smooth credit cycles.
N2 - Banks' limited knowledge about borrowers' creditworthiness constitutes an important friction in credit markets. Is this friction deeper in recessions, thereby contributing to cyclical swings in credit, or is the friction reduced, as bad times reveal information about firm quality? We test these alternative hypotheses using internal ratings data from a large Swedish cross-border bank and credit scores from a credit bureau. The ability to classify corporate borrowers by credit quality is greater during bad times and worse during good times. Soft and hard information measures both display countercyclical patterns. Our results suggest that information frictions in corporate credit markets are intrinsically countercyclical and not due to cyclical variation in monitoring effort. The presence of countercyclical information frictions provides a rationale for countercyclical provisions or capital in banks to smooth credit cycles.
AB - Banks' limited knowledge about borrowers' creditworthiness constitutes an important friction in credit markets. Is this friction deeper in recessions, thereby contributing to cyclical swings in credit, or is the friction reduced, as bad times reveal information about firm quality? We test these alternative hypotheses using internal ratings data from a large Swedish cross-border bank and credit scores from a credit bureau. The ability to classify corporate borrowers by credit quality is greater during bad times and worse during good times. Soft and hard information measures both display countercyclical patterns. Our results suggest that information frictions in corporate credit markets are intrinsically countercyclical and not due to cyclical variation in monitoring effort. The presence of countercyclical information frictions provides a rationale for countercyclical provisions or capital in banks to smooth credit cycles.
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How do banks respond to asset booms? This paper examines i) how U.S. banks responded to the World War I farmland boom; ii) the impact of regulation; and iii) how bank closures exacerbated the post-war bust. The boom encouraged new bank formation and balance sheet expansion (especially by new banks). Deposit insurance amplified the impact of rising crop prices on bank portfolios, while higher minimum capital requirements dampened the effects. Banks that responded most aggressively to the asset boom had a higher probability of closing in the bust, and counties with more bank closures experienced larger declines in land prices.
The authors thank Lee Alston, Mark Carlson, Matteo Crosignani, Chris Hanes and participants in the 2018 Cliometrics conference, Central New York Economic History Conference, Economic History Association Annual Meetings, and NBER Summer Institute for comments on earlier versions of this paper. Views expressed herein are those of the authors and not necessarily official positions of the Federal Reserve Bank of St. Louis, the Federal Reserve System, or the National Bureau of Economic Research.
The purpose of this paper is to investigate the corporate social responsibility (CSR) reporting information of Bangladeshi listed commercial banks and explores the potential effects of corporate governance (CG) elements on CSR disclosures.
This unique paper divulges the CSR related disclosure with possible impact of CG in the specific context of a transitional economy's banks such as Bangladesh. The paper contributes to the CSR literature as it presents empirical evidence of the influences of CG structure on the practices of CSR activities in developing countries' banking sector setting.
After a 2-hour drive from the ARS National Sedimentation Laboratory in Oxford, Mississippi, hydraulic engineer Doug Shields and agronomist Seth Dabney don hip waders and trudge through thick mud in a cottonfield, approaching the banks of Little Topashaw Creek.
Swollen and brown from heavy rains, the waterway cascades violently within its 20-foot canyon walls, rushing through a straightaway, over a headcut, and finally up against an S-curve. "It's too rough for going down into the stream today," says Shields. "But it's a great day for data collection and observing."
Shields, of the Oxford laboratory's Water Quality and Ecological Processes Research Unit, leads the Little Topashaw Creek Stream Corridor Rehabilitation Project. This effort, which involves all the lab's units, uses a 2-mile stretch of the creek for finding ways to make up for past abuses of watersheds. "Studies such as this can help us find cost-effective ways to help ecosystems recover," Shields says between rain squalls.
The structures reduce sediment transport, triggering natural deposition to heal channels enlarged by years of erosion. Shields says they cost about $25 per foot of treated bank, or 20 to 50 percent of the cost of recent stone bank-stabilization projects in the region.
Meanwhile, Shields and University of Memphis wetland plant physiologist Reza Pezeshki are studying revegetating eroded riparian streambanks by planting dormant black willow (Salix nigra) cuttings, called posts.
Previous greenhouse studies by ARS and Pezeshki showed that soaking willow posts in water for 10 days before planting significantly increased their survival and growth. In the recent research, the team planted about 4,000 willow posts along the creek. For comparison, they also planted cuttings that were not soaked and ones that were soaked for 14 days.
"Soaking significantly enhanced plant survival during the first year," says Shields. "Soaked posts survived at a rate of 64 percent, but only 53 percent of unsoaked posts survived." Perhaps more importantly, soaked posts did much better under stress. "About 70 percent of soaked posts planted on drier, high banks survived," says Shields. "Only 40 percent of unsoaked posts survived there."
"Vegetative barriers are widely used to control runoff and reduce soil erosion in cropland," says Dabney. "But they have not been used to control deep gullies in noncropped areas." Such gullies
commonly result from floodplain farming next to incised channels. "Edge-of-field gullies are normally controlled with drop-pipe structures composed of a small earthen dam drained by a metal culvert," says Dabney. "These are quite effective, but they require capital investment and eventually corrode."