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Durham Research Online
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Bank loan loss accounting treatments, credit cycles and crash risk.

Andreou, P.C. and Cooper, I. and Louca, C. and Philip, D. (2017) 'Bank loan loss accounting treatments, credit cycles and crash risk.', British accounting review., 49 (5). pp. 474-492.

Abstract

Banks that follow conditional conservatism in their loan loss accounting treatments benefit from a reduction in crash risk. The key discretionary loan loss accounting channels are provisions and allowances. We show that conditional conservatism reduces crash risk of small banks during periods of credit contraction and boom. Interestingly, for large banks, crash risk is not reduced by more conservative accounting even for those with higher levels of opacity. Hence regulation prompting for more conservative bank loan loss accounting does not present a significant opportunity to limit systemic effects arising from abrupt price declines in the stocks of large banks.

Item Type:Article
Full text:Publisher-imposed embargo until 18 March 2019.
(AM) Accepted Manuscript
First Live Deposit - 22 February 2017
Available under License - Creative Commons Attribution Non-commercial No Derivatives.
File format - PDF
(865Kb)
Status:Peer-reviewed
Publisher Web site:https://doi.org/10.1016/j.bar.2017.03.002
Publisher statement:© 2017 This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
Record Created:22 Feb 2017 12:13
Last Modified:14 Sep 2017 10:52

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