Accounting Seminar (2019-14)

Topic：Peer Effects in Bank Loan Accounting

Speaker：Charles Shi,Associate Professor,National University of Singapore Business School

Time: Monday, 28 Oct, 13:30-15:00

Location: Room 217, Guanghua Building 2

Abstract:

This is the first study documenting evidence that peer banks play a significant role in determining a bank’s accounting for loan loss provisions. Specifically, a 10% increase in peer banks’ provisions is associated with a 11.5% increase in a bank’s own provision. Our finding is robust to alternative classification of peer banks, various model specifications, and exogenous shock of regulatory scrutiny. With respect to heterogeneity of peer influence, we show that peer effects are more pronounced for banks with less capable managers, more homogeneous loans, and when banks are under greater regulatory scrutiny. Channel tests indicate that peer effects work through observational learning. Finally, our analysis of economic consequences suggests that peer effects increase the timeliness of bank accounting and reduce bank risk. Taken together, our findings fill a gap in the extant banking literature by identifying the importance of peer influence in determining bank financial reporting quality.

Introduction:

Dr Charles Shi is Dean’s Chair, Associate Professor of Accounting and Finance with tenure at the National University of Singapore Business School. His research examines the economic consequences of disclosure and securities regulations and the role of financial intermediaries in capital markets, and the effect of accounting information on credit risk assessment and debt pricing. He has published widely in premier journals such as Contemporary Accounting Research, the Journal of Financial Economics, the Journal of Accounting and Economics, Review of Accounting Studies, The Accounting Review, and Management Science.

Your participation is warmly welcomed!