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Bank response to SEC disclosure guidance issued during the 2007–2008 US financial crisis

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  • Hughes, Susan B.
  • Wood, Amy L.
  • Hodgdon, Christopher

Abstract

During 2008 the SEC increased its focus on the need for additional disclosures by banks and financial institutions, and issued specific guidance on disclosures of fair value estimates in the Management’s Discussion and Analysis (MD&A). In addition, the SEC and FASB issued joint guidance for determining estimates of fair value. In this study we analyze the critical accounting policy and estimate disclosures in the MD&A of 20 of the largest publicly-traded US banks for 2007 and 2008. The results of prior research into disclosure change in response to additional regulatory guidance predict that the length of the disclosures will increase; it is more difficult to predict changes in disclosure content in response to such guidance. We find the number of total sentences and accounting topics the banks disclosed significantly increased. The increases occur in accounting topics most severely affected by the financial crisis, and often specifically identified in SEC guidance. The disclosure content of these topic disclosures also significantly increased. However, we find that only 35% of the banks disclosed that they had discussed the estimates with their audit committee, and only two disclosed the accuracy of past estimates.

Suggested Citation

  • Hughes, Susan B. & Wood, Amy L. & Hodgdon, Christopher, 2011. "Bank response to SEC disclosure guidance issued during the 2007–2008 US financial crisis," Research in Accounting Regulation, Elsevier, vol. 23(2), pages 149-159.
    • Handle: RePEc:eee:reacre:v:23:y:2011:i:2:p:149-159
    DOI: 10.1016/j.racreg.2011.06.010
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    References listed on IDEAS

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    1. Paul M. Healy & Amy P. Hutton & Krishna G. Palepu, 1999. "Stock Performance and Intermediation Changes Surrounding Sustained Increases in Disclosure," Contemporary Accounting Research, John Wiley & Sons, vol. 16(3), pages 485-520, September.
    2. Hughes, Susan B. & Sander, James F. & Snyder, Jillian K., 2009. "Critical accounting policy and estimate disclosures: Company response to the evolving SEC guidance," Research in Accounting Regulation, Elsevier, vol. 21(1), pages 19-33.
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    7. Glezen, Gw & Millar, Ja, 1985. "An Empirical-Investigation Of Stockholder Reaction To Disclosures Required By Asr No-250," Journal of Accounting Research, Wiley Blackwell, vol. 23(2), pages 859-870.
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    Cited by:

    1. Ali Meftah Gerged & Rami Salem & Eshani Beddewela, 2023. "How does transparency into global sustainability initiatives influence firm value? Insights from Anglo‐American countries," Business Strategy and the Environment, Wiley Blackwell, vol. 32(7), pages 4519-4547, November.
    2. Lu, Hung-Yuan (Richard) & Mande, Vivek, 2014. "Does disaggregation of fair value information increase the value relevance of the fair value hierarchy?," Research in Accounting Regulation, Elsevier, vol. 26(1), pages 90-97.
    3. Edmonds, Christopher T. & Edmonds, Jennifer E. & Leece, Ryan D. & Vermeer, Thomas E., 2015. "Do risk management activities impact earnings volatility?," Research in Accounting Regulation, Elsevier, vol. 27(1), pages 66-72.

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