Journal of Accounting Research Vol. 49 No. 3 2011
The Timeliness of Accounting Write-Downs by U.S. Financial Institutions During the Financial Crisis of 2007-2008
Abstract
I examine the timeliness of write-downs taken by U.S. financial institutions during the financial crisis of 2007–2008. The timeliness of write-downs is measured by benchmarking the quarterly accounting write-down schedule with the devaluation schedule implied by exposure-specific credit indices such as the ABX. The results show that the accounting write-downs are less timely than the devaluations implied by credit indices. In a cross-sectional analysis of the determinants of the timeliness of write-downs, I document that corporate governance quality, regulatory investigations, and litigation pressure are positively related to the timeliness of write-downs, whereas the write-downs by firms with higher financial leverage, tighter regulatory constraints, and more complex exposures are less timely. I control for numerous exposure-specific characteristics and document that less risky exposures and exposures that were affected later during the financial crisis were written down later. Regarding the consequences of timeliness, I find that the exposure to risky assets is reflected faster in stock returns for firms with timelier write-downs.
- DOI
- 10.1111/j.1475-679x.2011.00410.x
- Volume
- 49
- Issue
- 3
- Pages
- 823-860
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref