Financial statement comparability and bank risk-taking |
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| Institution: | 1. Department of Accounting and Corporate Governance, Macquarie Business School, Macquarie University Sydney, Australia;2. Faculty of Finance, City University of Macau, Avenida Padre Tomas Pereira, Macao;3. School of Accounting, Curtin Business School, Curtin University, GPO Box U1987, Perth, Western Australia 6845, Australia;1. Department of Accounting and Corporate Governance, Macquarie Business School, Macquarie University, NSW 2109, Australia;2. School of Accountancy, Massey University, Private Bag 102904, Auckland, New Zealand;1. School of Business Administration, Dongbei University of Finance and Economics, Dalian, China;2. W. P. Carey School of Business, Arizona State University, USA |
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| Abstract: | This study examines the relationship between financial statement comparability and bank risk-taking. Our analysis of a sample of publicly listed U.S. banks over the 1994–2019 period shows that banks with more comparable financial statements are related to significantly less risk-taking. We also find that the negative relationship between comparability and risk-taking is more pronounced for firms with more severe moral hazard and agency problems. Our documented findings are robust across alternative measures of comparability and risk-taking and considering change analysis, after controlling for strength of corporate governance and using propensity score matching and two-stage least squares estimation to address endogeneity concerns. Our analysis also shows that the relationship between financial statement comparability and bank risk-taking is stronger for smaller banks than for larger banks. Overall, this study provides unique insights into the role of financial statement comparability in curbing risk-taking in the banking sector. |
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| Keywords: | Financial statement comparability Risk-taking Size Global financial crisis |
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