Reaction of Bank Stock Prices to Loan-Loss Reserve Announcements

Diane Scott Docking, Mark Hirschey and Elaine Jones

Review of Quantitative Finance and Accounting, 2000, vol. 15, issue 3, 277-97

Abstract: Significant own and contagious stock-price effects of bank LLR announcements exist despite the fact that these accounting adjustments have no concurrent cash-flow implications. Consistent with expected information effects, negative abnormal returns surrounding LLR announcements tend to be much more important in the case of regional as opposed to money-center banks. Accounting measures of bank soundness, and possibly regulatory pressure, appear to influence the market's assessment of LLR information for both announcing and nonannouncing banks. Copyright 2000 by Kluwer Academic Publishers

Date: 2000
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