The Federal Deposit Insurance Corporation Improvement Act, Bank Internal Controls and Financial Reporting Quality

26 Pages Posted: 17 Sep 2009 Last revised: 7 Feb 2012

See all articles by Ryan LaFond

Ryan LaFond

Algert Global, LLC

Haifeng You

Hong Kong University of Science & Technology (HKUST) - Department of Accounting

Date Written: September 14, 2009

Abstract

Altamuro and Beatty (2009) examine financial reporting quality before and after the Federal Deposit Insurance Corporation Improvement Act (FDICIA). They document increases in the validity of the loan loss provision, earnings persistence, predictability of future cash flows and reductions in benchmark-beating for banks complying with FDIC’s internal control regulations relative to non-complying banks. Our discussion focuses on Altamuro and Beatty’s interpretation of the results, specifically that the internal control provision of FDICIA improved financial reporting quality. In this paper, we provide a brief overview of FDICIA in an attempt to assess the importance of FDIC’s internal control regulations. We then review the findings of other studies on internal control regulations with the goal of evaluating what new insights we gain from Altamuro and Beatty. Next, we report new evidence relating to the subgroups driving the changes in financial reporting quality surrounding FDICIA. Finally, we discuss the results in the context of the current financial crisis and suggest avenues for future research.

Keywords: FDICIA, Internal Control, Financial Reporting Quality

Suggested Citation

LaFond, Ryan and You, Haifeng, The Federal Deposit Insurance Corporation Improvement Act, Bank Internal Controls and Financial Reporting Quality (September 14, 2009). Journal of Accounting & Economics (JAE), Vol. 49, Nos. 1-2, 2010, Available at SSRN: https://ssrn.com/abstract=1473606 or http://dx.doi.org/10.2139/ssrn.1473606

Ryan LaFond (Contact Author)

Algert Global, LLC ( email )

One Maritime Plaza
Suite 1525
San Francisco, CA 94111
United States

Haifeng You

Hong Kong University of Science & Technology (HKUST) - Department of Accounting ( email )

Clear Water Bay
Kowloon
Hong Kong

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