Real Activity Forecasts Using Loan Portfolio Information

58 Pages Posted: 27 Jan 2016 Last revised: 1 Dec 2020

See all articles by Urooj Khan

Urooj Khan

Columbia Business School - Accounting, Business Law & Taxation

N. Bugra Ozel

University of Texas at Dallas; The Wharton School

Date Written: January 27, 2016

Abstract

To extend and monitor loans, banks collect detailed and proprietary information about the financial prospects of their customers, many of whom are local businesses and households. Therefore, banks’ loan portfolios contain potentially useful information about local economic conditions. We investigate the association between information in loan portfolios and local economic conditions. Using a sample of U.S. commercial banks from 1990:Q1 to 2013:Q4, we document that information in loan portfolios aggregated to the state level is associated with current and future changes in statewide economic conditions. Furthermore, the provision for loan and lease losses contains information incremental to leading indicators of state-level economic activity and recessions. Loan portfolio information also helps to improve predictions of economic conditions at more granular levels, such as at the commuting zone level. We discuss relevance of these findings for economic analysis and forecasting, and the relation of our study to prior work on the informativeness of accounting information about the macroeconomy.

Keywords: Banking, coincident index, economic growth, forecasting, loans

JEL Classification: D82, E02, E32, G01, G21, M41

Suggested Citation

Khan, Urooj and Ozel, N. Bugra, Real Activity Forecasts Using Loan Portfolio Information (January 27, 2016). Journal of Accounting Research, Vol. 54, No. 3, 2016, Columbia Business School Research Paper No. 16-13, Available at SSRN: https://ssrn.com/abstract=2723414 or http://dx.doi.org/10.2139/ssrn.2723414

Urooj Khan

Columbia Business School - Accounting, Business Law & Taxation ( email )

3022 Broadway
New York, NY 10027
United States

N. Bugra Ozel (Contact Author)

University of Texas at Dallas ( email )

800 W Campbell Rd
Richardson, TX 75083-0688
United States

HOME PAGE: http://sites.google.com/view/bugraozel/home

The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

HOME PAGE: http://sites.google.com/view/bugraozel/home

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
103
Abstract Views
1,370
rank
308,933
PlumX Metrics