Research

Publications: 

Regulatory capital management to exceed thresholds (with Silvina Rubio) Journal of Money, Credit and Banking, accepted.

Auditors and client investment efficiency: a quasi-replication and further insights from a regulatory change (with Christopher Bleibtreu, Mert Erinc, and Zhenyang Shi). Journal of Business Economics (2024): 1-38. 

Work in Progress: 

When the Examiner Knocks: Banks’ Strategic Provisioning Around CRA Exams

(with Silvina Rubio) R&R in Management Science

Do scheduled supervisory examinations shape banks’ reporting decisions? We examine this question in the context of the Community Reinvestment Act (CRA), which encourages U.S. banks to serve low- and moderate-income communities. Federal agencies conduct CRA exams periodically, creating predictable windows of scrutiny that allow banks to strategically manage their reporting. We find that banks increase loan loss provisions in the quarters leading up to the CRA exams and reverse them afterward, consistent with strategic accrual management, to influence evaluation outcomes. This behavior is concentrated among underperforming banks relative to peers and those operating in CRA-eligible or high-minority areas. In contrast, it is limited to publicly traded banks and those with low regulatory capital, where market discipline and prudential constraints dominate. Importantly, pre-exam provisioning reduces the likelihood of unfavorable ratings, showing that accounting discretion can materially alter regulatory outcomes. Overall, our findings highlight how the timing and objectives of oversight affect managerial reporting choices and reveal an unintended consequence of stakeholder-oriented regulation.

Regulator-Approved External Assurance

(with Beatriz García Osma and Ines Simac) R&R in Management Science

We study voluntary assurance in private banks. This is a highly regulated industry, where audit is not mandatory and directors’ examinations (DEs)—a regulator-approved, non-attest engagement— are treated as audit-program equivalents. We find that an economically large number of U.S. private banks with assets under $500 million adopt DEs. However, only full audits are associated with improved reporting quality and forward-looking economic outcomes. DEs deliver no such benefits and are indistinguishable from less-than-audit services. We find that audits generate localized assurance spillovers, whereas DEs crowd out audit demand and suppress fees. DEs also do not reduce regulatory scrutiny, implying their appeal lies in cost savings rather than leniency. Our findings highlight the value of attest-level audits in regulated settings and caution regulators against endorsing lower-credibility substitutes.