Impact of credit risk management on provisioning expectations: Evidence from U.S. banks during the subprime crisis

Jean-Gabriel Cousin, Sébastien Dereeper and Gervais Essama Zoh

Finance Research Letters, 2024, vol. 62, issue PA

Abstract: This paper examines changes in the provisioning expectations of U.S. banks during the 2007–2009 subprime crisis. We used Bushman Williams (2015)’s model for delayed expected loss recognition (DELR) to create a statistic that captures a relative estimate of the timeliness of bank provisions. Our findings show that there was a large decline in DELR during the subprime crisis period. We demonstrate that it was the banks with an officer or a committee dedicated to analyzing credit risk that had the greatest improvement in their provision expectations.

Keywords: Bank regulation; Provision policy, Subprime crisis; Risk management; Governance (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:62:y:2024:i:pa:s1544612324001247

DOI: 10.1016/j.frl.2024.105094

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