Loan Loss Reporting, Early Disclosure, and Investor Reactions

Posted: 22 May 2000

See all articles by Gordon V. Karels

Gordon V. Karels

University of Nebraska at Lincoln - Department of Finance

Steven V. Mann

University of South Carolina

Stephen Wilcox

Minnesota State University, Mankato

Abstract

Several prior studies present evidence that bank loan-loss announcements have a significant impact on shareholder wealth. There is no satisfactory explanation, however, as to why these announcements should change share prices. This paper examines loan-loss announcements in the context of the early disclosure literature. We find banks that publicly announce losses before releasing their quarterly earnings report have a significant increase in shareholder wealth following the loan-loss announcement. Banks that choose to publicly announce loan-loss increases with the release of quarterly-earnings report experience a significant decrease in shareholder wealth prior to the loan-loss announcement. Our results support the notion that the timing of the loan- loss announcement provides information to investors.

JEL Classification: G21

Suggested Citation

Karels, Gordon V. and Mann, Steven V. and Wilcox, Stephen, Loan Loss Reporting, Early Disclosure, and Investor Reactions. Available at SSRN: https://ssrn.com/abstract=6046

Gordon V. Karels (Contact Author)

University of Nebraska at Lincoln - Department of Finance ( email )

Lincoln, NE 68588-0490
United States

Steven V. Mann

University of South Carolina ( email )

Francis M. Hipp Building
Darla Moore School of Business
Columbia, SC 29208
United States
803-777-4929 (Phone)
830-777-6876 (Fax)

Stephen Wilcox

Minnesota State University, Mankato ( email )

228 Wiecking Center
Mankato, MN 56001
United States
(507) 389-6531 (Phone)

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