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

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 banks 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. This paper was accepted by Suraj Srinivasan, accounting.

authors

• Stuber, Sarah

published proceedings

• MANAGEMENT SCIENCE

author list (cited authors)

• Ballew, H. B., Nicoletti, A., & Stuber, S. B.

citation count

• 1

complete list of authors

• Ballew, Hailey B||Nicoletti, Allison||Stuber, Sarah B

publication date

• January 2022

publisher

• Institute for Operations Research and the Management Sciences (INFORMS)  Publisher

published in

• Management science  Journal

keywords

• Accounting Standards
• Banks
• Financial Reporting
• Government Stimulus
• Risk-Taking

Digital Object Identifier (DOI)

• 10.1287/mnsc.2021.4223

start page

• 2363

end page

• 2371

volume

• 68

issue

• 3

URL

• http://dx.doi.org/10.1287/mnsc.2021.4223