Recent Research on Banks’ Financial Reporting and Financial Stability

Abstract

Banks’ financial reporting requirements and discretionary choices may affect financial stability by altering one or more of the likelihood that banks violate regulatory capital requirements, banks’ internal discipline over risk management and financial reporting, and external market and regulatory discipline over banks. In this article, I discuss five recent empirical papers that examine these channels linking banks’ financial reporting to financial stability. I explain how these papers identify economic contexts and associated financial reporting constructs that enable powerful examinations of these channels, and how they employ research designs that meaningfully address the issues regarding valid causal inference raised by Acharya & Ryan (2016) . I conclude that, while each study examines a specific channel or two in a specific setting, collectively the literature is making steady progress in enhancing our understanding of the causal forces at play in the channels linking banks’ financial reporting and financial stability, the goal set forth by Acharya & Ryan (2016) . I also identify open questions that these papers suggest for future research on the effects of banks’ financial reporting on financial stability.

With Regard To The Question Of Ensuring The Bank's Economic Security

“…There are many works in modern economic literature devoted to the study of topical issues of improving the system of economic security of banks, building a system of internal control -this is primarily the work of Ackroyd and Marsden (2006), Adrian, Covitz, and Liang (2015), Ellul (2015), Fedotova, Chugumbaev, Chugumbaeva, Sukhinin, and Kuzmina (2019), Fedotova, Lomakin, Tkachenko, and Gontar (2019), Han (2018), Ostapiuk, Karmaza, Kurylo, and Timchenko (2017), Ryan (2018), Saltanova (2017), Suglobov and Svetlova (2015), Zyabrova and Vasilyeva (2016). Nevertheless, today there are still many unresolved issues related to problems of identification and neutralization of risks and threats, the establishment of an effective internal control system that provides stable and reliable protection of customer information, assets and personal data.…”

Financial stability management in banks: strategy maps

“…As for financial crises, they can be local and unsystematic and not destroy the financial or economic system. While considering the approaches to determining the essence of financial stability management of a bank, it can be noted that its basis is the development and use of systems and techniques for rational planning of financial solutions implementation (Ryan, 2018;Tarullo, 2019;Farber, Herbst, Silverman, & von Wachter, 2019). Therefore, financial management in the bank should be considered from the position of synthesis of its constituent elements.…”

Determinants of Basel III Risk Disclosures: The Case of Gulf Cooperation Council Public Banks

“…For this, the economic and financial crisis has proven that the banking sector has failed to capture all of the necessary information that is required in order to ensure the effective and comprehensive regulation of the banking sector (Farina et al, 2017). Moreover, banks' financial reporting requirements and discretionary choices may affect financial stability (Ryan, 2018), and it reduces the cost of capital as investors achieve improved information and give more assurance to the corporation .…”