{"title":"The Decision Relevance of Loan Fair Values for Depositors","authors":"QI CHEN, RAHUL VASHISHTHA, SHUYAN WANG","doi":"10.1111/1475-679X.12564","DOIUrl":null,"url":null,"abstract":"<div>\n \n <p>Using a large sample of U.S. commercial banks from 1994 to 2019, we find that loan fair values are highly relevant for depositor decision making. A one-standard-deviation decrease in loan fair value performance is associated with more than 10% lower uninsured deposit flows than the sample average. Information in fair values about loan credit quality is quite limited and cannot account for the bulk of the relevance. Instead, consistent with models of bank fragility, the relevance seems to stem more from information on the decline in loan liquidation values, triggering panic-based withdrawals motivated by (self-fulfilling) expectations of withdrawals by other depositors. The findings inform the cost-benefit tradeoff of reporting loan fair values.</p>\n </div>","PeriodicalId":48414,"journal":{"name":"Journal of Accounting Research","volume":"63 1","pages":"207-254"},"PeriodicalIF":4.9000,"publicationDate":"2024-07-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Accounting Research","FirstCategoryId":"91","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/1475-679X.12564","RegionNum":2,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
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Abstract
Using a large sample of U.S. commercial banks from 1994 to 2019, we find that loan fair values are highly relevant for depositor decision making. A one-standard-deviation decrease in loan fair value performance is associated with more than 10% lower uninsured deposit flows than the sample average. Information in fair values about loan credit quality is quite limited and cannot account for the bulk of the relevance. Instead, consistent with models of bank fragility, the relevance seems to stem more from information on the decline in loan liquidation values, triggering panic-based withdrawals motivated by (self-fulfilling) expectations of withdrawals by other depositors. The findings inform the cost-benefit tradeoff of reporting loan fair values.
期刊介绍：
The Journal of Accounting Research is a general-interest accounting journal. It publishes original research in all areas of accounting and related fields that utilizes tools from basic disciplines such as economics, statistics, psychology, and sociology. This research typically uses analytical, empirical archival, experimental, and field study methods and addresses economic questions, external and internal, in accounting, auditing, disclosure, financial reporting, taxation, and information as well as related fields such as corporate finance, investments, capital markets, law, contracting, and information economics.
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