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The market reaction to bank regulatory reports

Author

Listed:
  • Brad A. Badertscher

    (University of Notre Dame)

  • Jeffrey J. Burks

    (University of Notre Dame)

  • Peter D. Easton

    (University of Notre Dame)

Abstract

We investigate the role of bank regulatory reports in the information environments of banks. Our findings are as follows. (1) Call Reports but not FR Y-9Cs elicit economically significant stock price and volume reactions when they are publicly released, despite the fact that Call Reports usually follow earnings announcements. (2) Some of the reaction is traceable to a schedule dealing with mortgage lending and servicing. (3) The release of the Call Reports is tightly clustered around the 30th day after quarter-end. (4) After bank regulators undertook a “modernization project” to speed the processing and public dissemination of regulatory reports, the banking industry routinely experiences abnormal stock price volatility and trading volume on the 30th day of the quarter. (5) The market reaction increased after media coverage of this study. Our findings are of interest to regulators who require and monitor the reports, banks that prepare the reports, investors who may use the reports, and academics who can base research designs on the timing patterns we uncover.

Suggested Citation

  • Brad A. Badertscher & Jeffrey J. Burks & Peter D. Easton, 2018. "The market reaction to bank regulatory reports," Review of Accounting Studies, Springer, vol. 23(2), pages 686-731, June.
    • Handle: RePEc:spr:reaccs:v:23:y:2018:i:2:d:10.1007_s11142-018-9440-8
    DOI: 10.1007/s11142-018-9440-8
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    References listed on IDEAS

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    1. Easton, Pd & Zmijewski, Me, 1993. "Sec Form 10k/10q Reports And Annual-Reports To Shareholders - Reporting Lags And Squared Market Model Prediction Errors," Journal of Accounting Research, Wiley Blackwell, vol. 31(1), pages 113-129.
    2. Beaver, Wh, 1968. "Information Content Of Annual Earnings Announcements," Journal of Accounting Research, Wiley Blackwell, vol. 6, pages 67-92.
    3. Jon A. Garfinkel & Jonathan Sokobin, 2006. "Volume, Opinion Divergence, and Returns: A Study of Post–Earnings Announcement Drift," Journal of Accounting Research, Wiley Blackwell, vol. 44(1), pages 85-112, March.
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    Cited by:

    1. Chen, Qi & Goldstein, Itay & Huang, Zeqiong & Vashishtha, Rahul, 2022. "Bank transparency and deposit flows," Journal of Financial Economics, Elsevier, vol. 146(2), pages 475-501.
    2. Qi Chen & Itay Goldstein & Zeqiong Huang & Rahul Vashishtha, 2020. "Liquidity Transformation and Fragility in the US Banking Sector," NBER Working Papers 27815, National Bureau of Economic Research, Inc.
    3. Guettler, Andre & Naeem, Mahvish & Norden, Lars & Van Doornik, Bernardus, 2024. "Pre-publication revisions of bank financial statements: A novel way to monitor banks?," Journal of Financial Intermediation, Elsevier, vol. 58(C).
    4. Tri Vi Dang & Gary Gorton & Bengt Holmström, 2020. "The Information View of Financial Crises," Annual Review of Financial Economics, Annual Reviews, vol. 12(1), pages 39-65, December.
    5. Nicoletti, Allison, 2018. "The effects of bank regulators and external auditors on loan loss provisions," Journal of Accounting and Economics, Elsevier, vol. 66(1), pages 244-265.
    6. Gopalan, Yadav, 2022. "The effects of ratings disclosure by bank regulators," Journal of Accounting and Economics, Elsevier, vol. 73(1).
    7. Seda Oz, 2020. "Did SFAS 166/167 decrease the information asymmetry of securitizing banks?," The Financial Review, Eastern Finance Association, vol. 55(4), pages 557-581, November.
    8. Iorgova, Silvia & Ross, Chase P., 2023. "Investor information and bank instability during the European debt crisis," Journal of Financial Stability, Elsevier, vol. 64(C).
    9. Arif, Salman & Marshall, Nathan T. & Schroeder, Joseph H. & Yohn, Teri Lombardi, 2019. "A growing disparity in earnings disclosure mechanisms: The rise of concurrently released earnings announcements and 10-Ks," Journal of Accounting and Economics, Elsevier, vol. 68(1).
    10. Liangliang Jiang & Ross Levine & Chen Lin & Wensi Xie, 2022. "Deposit Supply and Bank Transparency," Management Science, INFORMS, vol. 68(5), pages 3834-3855, May.
    11. Qing L. Burke & Terry D. Warfield, 2021. "Bank interest rate risk management and valuation of earnings," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(3), pages 4287-4337, September.
    12. Anna M. Costello & João Granja & Joseph Weber, 2019. "Do Strict Regulators Increase the Transparency of Banks?," Journal of Accounting Research, Wiley Blackwell, vol. 57(3), pages 603-637, June.

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    More about this item

    Keywords

    Call Report; Y-9C; Commercial banks; Bank holding company; Market reaction; Banking industry;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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