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Impact of credit risk management on provisioning expectations: Evidence from U.S. banks during the subprime crisis

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  • Cousin, Jean-Gabriel
  • Dereeper, Sébastien
  • Essama Zoh, Gervais

Abstract

This paper examines changes in the provisioning expectations of U.S. banks during the 2007–2009 subprime crisis. We used Bushman Williams (2015)’s model for delayed expected loss recognition (DELR) to create a statistic that captures a relative estimate of the timeliness of bank provisions. Our findings show that there was a large decline in DELR during the subprime crisis period. We demonstrate that it was the banks with an officer or a committee dedicated to analyzing credit risk that had the greatest improvement in their provision expectations.

Suggested Citation

  • Cousin, Jean-Gabriel & Dereeper, Sébastien & Essama Zoh, Gervais, 2024. "Impact of credit risk management on provisioning expectations: Evidence from U.S. banks during the subprime crisis," Finance Research Letters, Elsevier, vol. 62(PA).
    • Handle: RePEc:eee:finlet:v:62:y:2024:i:pa:s1544612324001247
    DOI: 10.1016/j.frl.2024.105094
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