Justin Yiqiang Jin

Impact of FDICIA internal controls on bank risk taking

The Federal Deposit Insurance Corporation Improvement Act (FDICIA) of 1991 was designed, among other things, to introduce risk-based deposit insurance, increase capital requirements, and improve banks’ internal controls. Of particular interest in this study are the requirements for annual audit and reporting of management’s and auditor’s assessment of the effectiveness of internal control for banks with

Unintended Consequences of the Increased Asset Threshold for FDICIA Internal Controls: Evidence from U.S. Private Banks

500 million or more in total assets (raised to

Managerial Ownership and Financial Analysts’ Information Environment

1 billion in 2005). We study the impact of these requirements on banks’ risk-taking behavior prior to the recent financial crisis and the consequent implications for bank failure and financial trouble during the crisis period. Using a sample of 1138 banks, we provide evidence that banks required to comply with the FDICIA internal control requirements have lower risk taking in the pre-crisis period. Specifically, the volatility of net interest margin, the volatility of earnings, and Z score show less risk-taking behavior. Furthermore, these banks are less likely to experience failure and financial trouble during the crisis period.

Managerial Ownership and Financial Analysts’ Information Environment: MANAGERIAL OWNERSHIP AND ANALYSTS’ INFORMATION

We examine the unintended consequences of the 2005 increase from

Discretion in Bank Loan Loss Allowance, Risk Taking, and Earnings Management

500 million to

Social Capital and Bank Stability

1 billion in the asset threshold for the Federal Deposit Insurance Corporation Improvement Act (FDICIA) internal control reporting requirements. We focus on a test sample of banks that increased their total assets from between

Empirical Evidence on Jurisdictions that Adopt IFRS

100 million and

Ability of Accounting and Audit Quality Variables to Predict Bank Failure During the Financial Crisis

500 million prior to the change in regulation to between

Do Private Company Targets that Hire Big 4 Auditors Receive Higher Proceeds

500 million and

Do Private Company Targets that Hire Big 4 Auditors Receive Higher Proceeds?*: Impact of Big 4 Auditor Choice on Proceeds

1 billion within two years following the change. These “affected” banks are no longer subject to the internal control requirements but would have been had the regulation not been changed. We hypothesize that these affected banks are likely to make riskier loans, which will increase the likelihood of failure during the crisis period. We find evidence consistent with this hypothesis. Affected banks have higher likelihood of failure during the crisis period than banks from two different control samples. We also find that auditor reputation (i.e., whether the bank is audited by a Big 4 auditor or an industry specialist auditor) has a moderating effect on the likelihood of failure for these affected banks.