Ability of accounting and audit quality variables to predict bank failure during the financial crisis

Journal of Banking and Finance

Volumn 35, Issue 11, 2011, Pages 2811-2819

  Jin, Justin Yiqiang ^a   Kanagaretnam, Kiridaran ^a   Lobo, Gerald J ^b  

^a MCMASTER UNIVERSITY   (Canada)

^b UNIVERSITY OF HOUSTON   (United States)

Author keywords

Audit quality; Auditor reputation; Bank failure; Financial crisis; Loan loss provisions; Loan quality; Troubled banks

Indexed keywords

EID: 80052138073     PISSN: 03784266     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.jbankfin.2011.03.005     Document Type: Article

References (34)

1. AICPA, 2006. Large Firm PCAOB Inspection Deficiency Analysis. http://www.aicpa.org/cpcaf/download/PCAOB_Inspection_Deficiency_Analysis_January2006.pdf.
2. Autore D.M., Billingsley R.S., Schneller M.I. Information uncertainty and auditor reputation. Journal of Banking and Finance 2009, 33(12):183-192.
3. Barth M.E., Landsman W.R. How did financial reporting contribute to the financial crisis?. European Accounting Review 2010, 19(3):399-423.
4. Becker C., DeFond M., Jiambalvo J., Subramanyam K. The effect of audit quality on earnings management. Contemporary Accounting Research 1998, 15(Spring):1-24.
5. Bedard J.C., Biggs S.F. The effect of domain-specific experience on evaluation of management representations in analytical procedures. Auditing: A Journal of Practice & Theory 1991, 77(Suppl.):90.
6. Beltratti, A., Stulz, R.M., 2010. The credit crisis around the globe: why did some banks perform better? Working Paper. Ohio State University.
7. Berger A.N., Herring R.J., Szego G.P. The role of capital in financial institutions. Journal of Banking and Finance 1995, 19(3-4):393-430.
8. Bhattacharyya, S., Purnanandam, A., 2010. Risk-taking by banks: what did we know and when did we know it? Working Paper. University of Michigan.
9. Carcello J., Nagy A. Client size, auditor specialization and fraudulent financial reporting. Managerial Auditing Journal 2004, 19(5):651-668.
10. Craswell A., Francis J., Taylor S. Auditor brand name reputations and industry specializations. Journal of Accounting and Economics 1995, 20(December):297-322.
11. Demyanyk, Y.S., Hasan, I., 2009. Financial crises and bank failures: a review of prediction methods. Working Paper. Federal Reserve Bank of Cleveland.
12. Erkens, D., Hung, M., Matos, P., 2009. Corporate governance in the recent financial crisis: evidence from financial institutions worldwide. Working Paper. University of Southern California.
13. Fonseca A., González F. Cross-country determinants of bank income smoothing by managing loan-loss provisions. Journal of Banking and Finance 2008, 32(2):217-218.
14. General Accounting Office, 2003. Public accounting firms. Mandated Study on Consolidation and Competition (July).
15. Heckman J.J. Sample selection bias as a specification error. Econometrica 1979, 47:153-162.
16. Hindo B. Audit clients get the heave-ho. Business Week 2003, (December 1):7.
17. Kanagaretnam K., Lobo G., Yang D. Joint tests of signaling and income smoothing through bank loan loss provisions. Contemporary Accounting Research 2004, 843(Winter):884.
18. Kanagaretnam K., Krishnan G., Lobo G.J. Is the market valuation of banks' loan loss provision conditional on auditor reputation?. Journal of Banking and Finance 2009, 33(6):1039-1047.
19. Kanagaretnam K., Lim C.Y., Lobo G.J. Auditor reputation and earnings management: international evidence from the banking industry. Journal of Banking and Finance 2010, 34(6):2318-2327.
20. Kashyap, A.K., Rajan, R.G., Stein J.C., 2008. Rethinking capital regulation. Working Paper. University of Chicago.
21. Kim M., Kross W. The impact of the 1989 change in bank capital standards on loan loss provisions and loan write-offs. Journal of Accounting and Economics 1998, 25(1):69-99.
22. Krishnan G. Audit quality and the pricing of discretionary accruals. Auditing: A Journal of Practice & Theory 2003, 109(March):126.
23. Laux C., Leuz C. The crisis of fair-value accounting: making sense of the recent debate. Accounting, Organizations and Society 2009, 34(6-7):826-834.
24. Lel U., Miller D. International cross-listing, firm performance and top management turnover: a test of the bonding hypothesis. The Journal of Finance 2008, 63(4):1897-1937.
25. Liu C., Ryan S.G. Income smoothing over the business cycle: changes in banks' coordinated management of provisions for loan losses and loan charge-offs from the pre-1990 bust to the 1990s boom. The Accounting Review 2006, 81(2):421-441.
26. Murphy C.W. Goodbye FDICIA, Hello Sarbox - Sort of 2004, PricewaterhouseCoopers Publications.
27. Myers S.C. Determinants of corporate borrowing. Journal of Financial Economics 1977, 5(2):147-175.
28. Oshinsky R., Olin V. Troubled banks: why don't they all fail?. FDIC Banking Review 2006, 18(1):23-44.
29. Petersen M. Estimating standard errors in finance panel data sets: comparing approaches. Review of Financial Studies 2009, 22(1):435-480.
30. Rogers W. Regression standard errors in clustered samples. STATA Technical Bulletin 1993, 13:19-23.
31. Ryan S.G. Accounting in and for the subprime crisis. The Accounting Review 2008, 83(6):1605-1638.
32. Teoh S., Wong T. Perceived auditor quality and earnings response coefficient. The Accounting Review 1993, 68(April):346-367.
33. Wahlen J.M. The nature of information in commercial bank loan loss disclosures. The Accounting Review 1994, 455(July):478.
34. Williams R. A note on robust variance estimation for clustered-correlated data. Biometrics 2000, 56:645-646.