Abstract
This paper examines changes in the provisioning expectations of U.S. banks during the 2007–2009 subprime crisis. We used Bushman Williams (2015)’s model for delayed expected loss recognition (DELR) to create a statistic that captures a relative estimate of the timeliness of bank provisions. Our findings show that there was a large decline in DELR during the subprime crisis period. We demonstrate that it was the banks with an officer or a committee dedicated to analyzing credit risk that had the greatest improvement in their provision expectations.
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