Financial Reporting, Supplemental Disclosures, and Bank Share Prices

The explosion in the volume of required financial disclosures has been attributed to a regulatory goal of supplying information that is relevant to estimating market values. There has been little research to determine whether the mandated additional disclosures are achieving this goal, partially bec...

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Bibliographic Details
Published in:Journal of accounting research 1989-10, Vol.27 (2), p.157-178
Main Authors: Beaver, William, Eger, Carol, Ryan, Stephen, Wolfson, Mark
Format: Article
Language:English
Subjects:
Bank assets
Bank loans
Bank markets
Banking industry
Book value
Credit risk
Disclosure
Financial instruments
Financial reporting
Financial statements
Loan defaults
Loan losses
Loan rates
Mathematical models
Regulations
Statistical analysis
Studies
Variable coefficients
Citations: Items that cite this one
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Summary:The explosion in the volume of required financial disclosures has been attributed to a regulatory goal of supplying information that is relevant to estimating market values. There has been little research to determine whether the mandated additional disclosures are achieving this goal, partially because of the complicated and diverse nature of the production functions and the capital structures of the firms included in the tests. By focusing on supplemental disclosure issues for a set of firms with a relatively simple and homogeneous production function and capital structure, such as banks, it is possible to construct a simple model of the relation between the market and book values of the banks' common equities and to test whether cross-sectional differences in market-to-book ratios are captured by these supplemental disclosures. The results indicate that supplemental disclosures concerning characteristics of the loan portfolio do have incremental explanatory power beyond that provided by "allowance for loan losses."
ISSN:0021-8456
1475-679X
DOI:10.2307/2491230