Review of Accounting Studies

, Volume 20, Issue 3, pp 1164–1209 | Cite as

Quarter-end repo borrowing dynamics and bank risk opacity

  • Edward L. Owens
  • Joanna Shuang WuEmail author


We investigate the extent to which banks’ quarter-end borrowings in the repurchase market deviate from within-quarter levels, and associated factors. Quarter-end repo liabilities are materially lower than within-quarter averages for a large fraction of sample banks. These deviations are more pronounced at banks with a higher concentration of repo borrowings in their liability structure and with larger absolute trading gains or losses. Furthermore, the association with trading activity is mitigated when banks are better capitalized. We also find that these deviations are associated with bank depositor and borrower behavior. Together, the evidence suggests that deviations reflect both active window dressing and passive customer-driven liquidity dynamics. We document that unexpected downward quarter-end deviations in repo liabilities are associated with adverse short-term capital market consequences. Over the long term, banks with more frequent downward quarter-end deviations exhibit higher credit risk, but we find mixed evidence for equity market valuation multiples.


Window dressing Sale and repurchase agreement Bank opacity Short-term borrowing 

JEL Classification

G14 G21 G28 M40 



We thank Anne Beatty, Jose Berrospide, Robert Bushman, Elizabeth Chuk, Dan Collins, Anya Kleymenova (discussant), Anzhela Knyazeva, Phil Picariello, Scott Richardson (editor), Stephen Ryan, William Schwert, Robert Storch, Jerry Zimmerman, two anonymous reviewers, and workshop participants at George Washington University, London Business School, New York University, Rice University, University of Rochester, the University of Minnesota 2011 Empirical Research Conference, the Fifth Annual Toronto Accounting Research Conference, the 2012 Utah Winter Accounting Conference, and the 2014 Review of Accounting Studies Conference for helpful comments and suggestions.


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Copyright information

© Springer Science+Business Media New York 2015

Authors and Affiliations

  1. 1.Goizueta Business SchoolEmory UniversityAtlantaUSA
  2. 2.Simon Business SchoolUniversity of RochesterRochesterUSA

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