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Accounting Discretion of Banks During a Financial Crisis (Huizinga H., Laeven L.)

Financial Crises Regulation Risk-taking and Risk Management Stability&Soundness

Abstract This paper shows that banks use accounting discretion to overstate the value of distressed assets. Banks' balance sheets overvalue real estate-related assets compared to the market value of these assets, especially during the U.S. mortgage crisis. Share prices of banks with large exposure to mortgage-backed securities also react favorably to recent changes in accounting rules that relax fair-value accounting, and these banks provision less for bad loans. Furthermore, distressed banks use discretion in the classification of mortgage-backed securities to inflate their books. Our results indicate that banks' balance sheets offer a distorted view of the financial health of the banks.
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Libref/ Huizinga H., Laeven L. (2009) “Accounting Discretion of Banks During a Financial Crisis”, IMF Working Paper № 09/207, pp. 1-42
© Программирование — Александр Красильников, 2008
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