ORCID
Jeremy Bertomeu, https://orcid.org/0000-0001-6746-5767
Language
English (en)
Publication Date
2011
Abstract
This paper examines how financial reporting regulations aff ect, and respond to, macroeconomic cycles by exploring a pos - itive framework in which regulators subject to political pr essures respond to cyclical demands by borrowers and lender s. We establish that, as economic conditions initially declin e, political power shifts toward interest groups favoring l ess fi- nancial transparency. What follows is a counter-cyclical i ncrease in economic activity, as more non-reporting loans a re financed, possibly coincidental with more aggregate uncert ainty. During a recession, reporting quality is increased, po- tentially causing a crisis-like adjustment of economic act ivity to the cycle. We also discuss implications for event st udies, bank lobbying, mark-to-market and cost of capital.
Document Type
Working Paper
DOI
https://doi.org/10.7936/9s0j-dq28
Author's Department
Accounting
Recommended Citation
Bertomeu, Jeremy and Magee, Robert P., "From Low-Quality Reporting to Financial Crises: Politics of Disclosure Regulation Along the Economic Cycle" (2011). Olin Business School Faculty Research. 11.
https://openscholarship.wustl.edu/business_facpubs/11