The Effect of the Paycheck Protection Program and Financial Reporting Standards on Bank Risk-Taking

Hailey B. Ballew (), Allison Nicoletti () and Sarah B. Stuber ()
Additional contact information
Hailey B. Ballew: Jones Graduate School of Business, Rice University, Houston, Texas 77005
Allison Nicoletti: The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104
Sarah B. Stuber: Mays Business School, Texas A&M University, College Station, Texas 77843

Management Science, 2022, vol. 68, issue 3, 2363-2371

Abstract: This paper examines the consequences of the paycheck protection program (PPP) for bank risk-taking and whether the shift to the current expected credit loss (CECL) model moderates this effect. We find that the extent of a bank’s PPP participation is associated with relatively greater changes in risk-taking outside of the PPP. We also show that this effect is concentrated in banks that have not early adopted the CECL model and banks with timelier pre-PPP loan loss provisions, suggesting that timelier loan loss recognition constrains risk-taking incentives. Overall, our findings provide insight into the indirect consequences of government stimulus programs administered through banks and the role of accounting in constraining bank risk-taking.

Keywords: financial reporting; accounting standards; risk-taking; government stimulus; banks (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.2021.4223 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:68:y:2022:i:3:p:2363-2371

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().