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.
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Karels, G.V., Mann, S.V. & Wilcox, S.E. Loan loss reporting, early disclosure, and investor reactions. J Econ Finan 18, 179–191 (1994). https://doi.org/10.1007/BF02920521
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DOI: https://doi.org/10.1007/BF02920521