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Banks' Survival during the Financial Crisis: The Role of Regulatory Reporting Quality


Jeffrey Ng


Singapore Management University - School of Accountancy

Tjomme O. Rusticus


London Business School; Northwestern University - Kellogg School of Management

November 2, 2011

Singapore Management University School of Accountancy Research Paper No. 2

Abstract:     
We investigate the relation between the quality of bank regulatory reporting prior to and bank stability during the financial crisis that erupted in 2008. Using a large sample of private and public commercial banks in the United States and the incidence of accounting restatements as a proxy for the overall quality of the reporting system, we find that reporting quality is positively associated with stability. We show that lower reporting quality before the crisis is associated with higher non-performing loans and lower profitability at the onset of the crisis. We document that banks with lower reporting quality are more likely to experience regulatory intervention through enforcement actions and bank failures during the crisis. We also find some evidence that higher reporting quality is associated with more effective regulatory enforcement actions. We corroborate our findings using an alternative proxy that focuses on the quality of the loan loss provision. A key implication of our findings is that good regulatory reporting is important for the success of the banking system.

Number of Pages in PDF File: 57

Keywords: Regulatory reporting quality, financial crisis, regulatory intervention, bank failure

JEL Classification: G21, G33, G38, M41

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Date posted: July 22, 2011 ; Last revised: July 19, 2013

Suggested Citation

Ng, Jeffrey and Rusticus, Tjomme O., Banks' Survival during the Financial Crisis: The Role of Regulatory Reporting Quality (November 2, 2011). Singapore Management University School of Accountancy Research Paper No. 2. Available at SSRN: http://ssrn.com/abstract=1892481 or http://dx.doi.org/10.2139/ssrn.1892481

Contact Information

Jeffrey Ng
Singapore Management University - School of Accountancy ( email )
60 Stamford Road
Room 4008
Singapore, 178900
Singapore
+6568280543 (Phone)

Tjomme O. Rusticus (Contact Author)
London Business School ( email )
Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom
Northwestern University - Kellogg School of Management ( email )
2001 Sheridan Road
Evanston, IL 60208
United States
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