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Ballew, Hailey B.; Nicoletti, Allison; Stuber, Sarah B.

The Effect of the Paycheck Protection Program and Financial Reporting Standards on Bank Risk-Taking

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  • Media type: E-Article
  • Title: The Effect of the Paycheck Protection Program and Financial Reporting Standards on Bank Risk-Taking
  • Contributor: Ballew, Hailey B.; Nicoletti, Allison; Stuber, Sarah B.
  • Published: Institute for Operations Research and the Management Sciences (INFORMS), 2022
  • Published in: Management Science, 68 (2022) 3, Seite 2363-2371
  • Language: English
  • DOI: 10.1287/mnsc.2021.4223
  • ISSN: 0025-1909; 1526-5501
  • Origination:
  • Footnote:
  • Description: This paper examines the consequences of the paycheck protection program (PPP) for bank risk-taking and whether the shift to the current expected credit loss (CECL) model moderates this effect. We find that the extent of a bank’s PPP participation is associated with relatively greater changes in risk-taking outside of the PPP. We also show that this effect is concentrated in banks that have not early adopted the CECL model and banks with timelier pre-PPP loan loss provisions, suggesting that timelier loan loss recognition constrains risk-taking incentives. Overall, our findings provide insight into the indirect consequences of government stimulus programs administered through banks and the role of accounting in constraining bank risk-taking. This paper was accepted by Suraj Srinivasan, accounting.