NDLI: Quarter-end repo borrowing dynamics and bank risk opacity

Content Provider	Springer Nature Link
Author	Owens, Edward L. Wu, Joanna Shuang
Copyright Year	2015
Abstract	We investigate the extent to which banks’ quarter-end borrowings in the repurchase market deviate from within-quarter levels, and associated factors. Quarter-end repo liabilities are materially lower than within-quarter averages for a large fraction of sample banks. These deviations are more pronounced at banks with a higher concentration of repo borrowings in their liability structure and with larger absolute trading gains or losses. Furthermore, the association with trading activity is mitigated when banks are better capitalized. We also find that these deviations are associated with bank depositor and borrower behavior. Together, the evidence suggests that deviations reflect both active window dressing and passive customer-driven liquidity dynamics. We document that unexpected downward quarter-end deviations in repo liabilities are associated with adverse short-term capital market consequences. Over the long term, banks with more frequent downward quarter-end deviations exhibit higher credit risk, but we find mixed evidence for equity market valuation multiples.
Starting Page	1164
Ending Page	1209
Page Count	46
File Format	PDF
ISSN	13806653
Journal	Review of Accounting Studies
Volume Number	20
Issue Number	3
e-ISSN	15737136
Language	English
Publisher	Springer US
Publisher Date	2015-07-11
Publisher Place	New York
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Window dressing Sale and repurchase agreement Bank opacity Short-term borrowing Accounting/Auditing Finance/Investment/Banking Public Finance & Economics
Content Type	Text
Resource Type	Article
Subject	Accounting

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