TY - JOUR
T1 - Debtholder monitoring incentives and bank earnings opacity
AU - Danisewicz, Piotr
AU - McGowan, Danny
AU - Onali, Enrico
AU - Schaeck, Klaus
PY - 2020/5/12
Y1 - 2020/5/12
N2 - We exploit exogenous legislative changes that alter the priority structure of different classes of debt to study how debtholder monitoring incentives affect bank earnings opacity. We present novel evidence that exposing nondepositors to greater losses in bankruptcy reduces earnings opacity, especially for banks with larger shares of nondeposit funding, listed banks, and independent banks. The reduction in earnings opacity is driven by a lower propensity to overstate earnings and is more pronounced among larger banks, and in banks with larger real estate loan exposure. Our findings highlight the importance of creditors’ monitoring incentives in improving the quality of information disclosure.
AB - We exploit exogenous legislative changes that alter the priority structure of different classes of debt to study how debtholder monitoring incentives affect bank earnings opacity. We present novel evidence that exposing nondepositors to greater losses in bankruptcy reduces earnings opacity, especially for banks with larger shares of nondeposit funding, listed banks, and independent banks. The reduction in earnings opacity is driven by a lower propensity to overstate earnings and is more pronounced among larger banks, and in banks with larger real estate loan exposure. Our findings highlight the importance of creditors’ monitoring incentives in improving the quality of information disclosure.
KW - bank earnings opacity
KW - debt structure
KW - debtholder monitoring incentives
KW - earnings management
UR - https://www.cambridge.org/core/journals/journal-of-financial-and-quantitative-analysis
UR - https://jfqa.org/2020/01/19/debtholder-monitoring-incentives-and-bank-earnings-opacity/
U2 - 10.1017/S0022109020000241
DO - 10.1017/S0022109020000241
M3 - Article
SN - 0022-1090
JO - Journal of Financial and Quantatative Analysis
JF - Journal of Financial and Quantatative Analysis
ER -