{"title":"IFRS 7 adoption and bank risk taking","authors":"Gerald J. Lobo , Chong Wang , Feng (Harry) Wu","doi":"10.1016/j.jaccpubpol.2024.107225","DOIUrl":null,"url":null,"abstract":"<div><p>We examine whether and how banks’ risk disclosure relates to their risk taking behavior. Effective from 2007, International Financial Reporting Standards No. 7 (IFRS 7) requires the disclosure of risk arising from financial instruments, which enhances bank risk disclosure. Using a difference-in-differences analysis, we document a significant decrease in bank risk taking following IFRS 7 adoption. This effect is more prominent when accounting rules are more strictly enforced and alternative bank risk constraining means are weak. We also find that after IFRS 7 adoption, banks are more prudent in loan offering that helps reduce risk. Overall, our results are consistent with the market discipline view of bank risk disclosure and underscore IFRS 7′s role in improving financial stability.</p></div>","PeriodicalId":48070,"journal":{"name":"Journal of Accounting and Public Policy","volume":"46 ","pages":"Article 107225"},"PeriodicalIF":3.3000,"publicationDate":"2024-06-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Accounting and Public Policy","FirstCategoryId":"91","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0278425424000486","RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
We examine whether and how banks’ risk disclosure relates to their risk taking behavior. Effective from 2007, International Financial Reporting Standards No. 7 (IFRS 7) requires the disclosure of risk arising from financial instruments, which enhances bank risk disclosure. Using a difference-in-differences analysis, we document a significant decrease in bank risk taking following IFRS 7 adoption. This effect is more prominent when accounting rules are more strictly enforced and alternative bank risk constraining means are weak. We also find that after IFRS 7 adoption, banks are more prudent in loan offering that helps reduce risk. Overall, our results are consistent with the market discipline view of bank risk disclosure and underscore IFRS 7′s role in improving financial stability.
期刊介绍：
The Journal of Accounting and Public Policy publishes research papers focusing on the intersection between accounting and public policy. Preference is given to papers illuminating through theoretical or empirical analysis, the effects of accounting on public policy and vice-versa. Subjects treated in this journal include the interface of accounting with economics, political science, sociology, or law. The Journal includes a section entitled Accounting Letters. This section publishes short research articles that should not exceed approximately 3,000 words. The objective of this section is to facilitate the rapid dissemination of important accounting research. Accordingly, articles submitted to this section will be reviewed within fours weeks of receipt, revisions will be limited to one, and publication will occur within four months of acceptance.
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