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Banks’ Financial Reporting Frequency and Asset Quality

Posted: 9 Mar 2017 Last revised: 30 Sep 2017

Karthik Balakrishnan

London Business School

Aytekin Ertan

London Business School

Date Written: September 28, 2017

Abstract

We examine the effects of banks’ financial reporting frequency from 2000 to 2014 and find that quarterly reporting improves their loan portfolio quality. Sample banks experience a relative decrease of about 11 percent in their nonperforming loans after switching to quarterly financial disclosures. Consistent with market discipline enhancing lending practices, these results are stronger in regimes with weaker depositor insurance and external monitoring, and in those with stronger capital markets. We also find that banks that provide quarterly financial information experience lower deposit interest rates and credit default swap spreads. Collectively, our findings suggest that quarterly reporting reduces banks’ risk-taking.

Keywords: Financial Reporting Frequency, Banking, Regulation, Asset Quality, Lending

JEL Classification: G21, G28, G32, M41, M48

Suggested Citation

Balakrishnan, Karthik and Ertan, Aytekin, Banks’ Financial Reporting Frequency and Asset Quality (September 28, 2017). The Accounting Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2928994 or http://dx.doi.org/10.2139/ssrn.2928994

Karthik Balakrishnan

London Business School ( email )

Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom

Aytekin Ertan (Contact Author)

London Business School ( email )

Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom
442070008131 (Phone)

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