Bank financial reporting opacity and uninsured deposit financing

• Main Author: Nguyen, Ngan Thi Thai
• Other Authors: Riedl, Edward J.
• Language: en_US
• Published: 2021
• Subjects: Accounting
• Online Access: https://hdl.handle.net/2144/42624

This study examines the association between bank financial reporting opacity, measured by delayed expected loss recognition, and banks’ uninsured deposit financing. In particular, following calls from prior research, I investigate the effects of reporting opacity on this critical source of bank financing, which represents over $5 trillion at 2019. Using quarterly regulatory filings of federally-insured US commercial banks, I confirm a predicted negative association between uninsured deposits and larger delays in expected loss recognition, my proxy for reporting opacity. I also document expected cross-sectional variation, with this negative association accentuated for banks that are not too-big-to-fail (as these lack the implicit government guarantees of too-big-to-fail banks), and some evidence for banks that are not publicly-traded (which have lower overall reporting and disclosure quality relative to publicly-traded banks). My findings contribute to the extant literature on bank opacity, uninsured deposit financing, and the consequences of loan loss provisioning by suggesting that delayed expected loss recognition affects uninsured deposit financing.