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The effects of ratings disclosure by bank regulators

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  • Gopalan, Yadav

Abstract

I examine how banks change their risk management practices in response to the private disclosure of regulatory ratings that summarize bank risk-taking. Upon ratings disclosure, affected banks increase the timeliness of their loan loss provisioning. These effects are concentrated among banks that lie below key rating thresholds and those headquartered in states with low competition. After ratings disclosure, deficient banks decrease commercial lending while shifting assets into cash. Overall, my findings highlight how performance measures produced and privately disclosed by a third party can influence actions within a firm.

Suggested Citation

  • Gopalan, Yadav, 2022. "The effects of ratings disclosure by bank regulators," Journal of Accounting and Economics, Elsevier, vol. 73(1).
    • Handle: RePEc:eee:jaecon:v:73:y:2022:i:1:s0165410121000537
    DOI: 10.1016/j.jacceco.2021.101438
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    More about this item

    Keywords

    Disclosure; Financial reporting; Financial regulation; CAMELS ratings; Bank supervision; Loan loss provisions;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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