Skip to main content
Log in

The market reaction to bank regulatory reports

  • Published:
Review of Accounting Studies Aims and scope Submit manuscript

Abstract

We investigate the role of bank regulatory reports in the information environments of banks. Our findings are as follows. (1) Call Reports but not FR Y-9Cs elicit economically significant stock price and volume reactions when they are publicly released, despite the fact that Call Reports usually follow earnings announcements. (2) Some of the reaction is traceable to a schedule dealing with mortgage lending and servicing. (3) The release of the Call Reports is tightly clustered around the 30th day after quarter-end. (4) After bank regulators undertook a “modernization project” to speed the processing and public dissemination of regulatory reports, the banking industry routinely experiences abnormal stock price volatility and trading volume on the 30th day of the quarter. (5) The market reaction increased after media coverage of this study. Our findings are of interest to regulators who require and monitor the reports, banks that prepare the reports, investors who may use the reports, and academics who can base research designs on the timing patterns we uncover.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2

Similar content being viewed by others

Notes

  1. The recognition and measurement practices followed in creating the regulatory reports conform to U.S. generally accepted accounting principles (GAAP), although the reports provide information that goes beyond what is required by U.S. GAAP. Because Call Reports are bank-level reports, each bank (along with its consolidated subsidiaries) is considered an accounting entity (FDIC 2012, 11).

  2. Gathering these dates in real time by downloading the bank files each day from SNL Financial was necessary because SNL Financial overwrites its record of the original filing when there is an amendment.

  3. For ease of exposition, we refer to “day 30” as the 30th calendar day following quarter-end or as the next business day, if the 30th calendar day falls on a weekend or holiday.

  4. Regulation FD requires advanced notice of earnings conference calls (SEC 2000). Although no advanced notice of earnings press releases is technically required, in practice the vast majority of public companies issue prior notices of earnings press releases because conference calls are typically conducted in conjunction with the press release. Even before Regulation FD, it was common practice for firms to give prior notice of earnings releases.

  5. Some studies of the EDGAR period find a statistically significant market reaction on 10-K/10-Q filing dates (Asthana and Balsam 2002; Griffin 2003; You and Zhang 2009) but do not control for concurrent earnings news.

  6. The official form name of the Call Report is “FFIEC 031” for banks with domestic and foreign offices and “FFIEC 041” for banks with domestic offices only. Bank holding companies with total consolidated assets of less than $500 million generally are not required to file Y-9Cs.

  7. The Call Report fields are RSSD8798 and RSSD8799.The Y-9C fields are BHCKF841 and BHCKF842.

  8. SNL Financial (now S&P Global) also collects, standardizes, and disseminates all relevant corporate, financial, market and M&A data for the banking, financial services, insurance, real estate, energy, and metals and mining industries.

  9. Any report released on a U.S. holiday or a weekend is adjusted to the next trading day. In addition, during the sample period the U.S stock market was closed due to Hurricane Sandy on Oct. 29 and 30, 2012, and therefore we assign Oct. 31 as the regulatory filing date.

  10. An alternative approach would be to base the denominator on days nearer to the event, and to use days both before and after the event. However, a difficulty with this approach is that the days near a given report’s release often contain other report releases, and market activity may be high for several days around these other report releases, complicating efforts to purge nonnormal days from the control window.

  11. We do not market adjust bank i’s share turnover because the share turnover of our sample banks tends to exhibit a weak relation with market-level share turnover. In untabulated analysis, we estimate bank-quarter regressions of two-day bank-level share turnover on two-day market-level share turnover over the last month of the quarter (i.e., over the control period used in the VOL denominator). We find no statistically positive relation for 52% of bank-quarters. This absence of a statistically positive relation is particularly common among banks whose Call Reports are released before earnings announcements; we find no statistically positive relation for 69% of these bank-quarters, with 35% having a negative estimated relation. In robustness tests, we market-adjust VOL as in Garfinkel and Sokobin (2006) and find statistically higher volume around Call Reports releases that follow earnings announcements. Volume is not statistically higher for Call Reports that precede earnings announcements, perhaps because the market adjustment creates noise for these banks in particular.

  12. In our sample period, the 30th calendar day always falls on a trading day.

  13. Figure 1 may not be used as an indication of the degree of clustering of Y-9C reports because fourth-quarter Y-9Cs have a different due-date than interim quarter Y-9Cs; we address this issue next.

  14. Despite the spike in market activity, in untabulated analysis, we find almost no media coverage of Call Report releases. In the five days (−2, +2) surrounding day 30 from 2005 to July 2017, we find that an average of 0.2 articles per day mention “Call Report” on the Dow Jones Newswire. We also find no increase in analyst forecast revisions around peak release times of Call Reports or Y-9Cs.

  15. Because we tailor the day numbering scheme to the Call Report due date, the figures slightly understate the degree of Y-9C clustering. This occurs because the number of trading days between day 0 and the due date of the Y-9C varies across quarters. For example, in one quarter the Y-9C due date might fall on day +7, but in another quarter, it might fall on day +8.

  16. Banks that exceed the $2 million threshold for schedule RC-D can opt out if they have no foreign offices and less than $100 million in total assets (FDIC 2013b, 1). Banks with less than $1 billion in total assets must complete schedule RC-P if they exceed $10 million in certain mortgage origination, purchase, or sale activities (FDIC 2013c, 1).

  17. In untabulated analysis, we find that several other measures of report detail and bank complexity are highly correlated with bank size, causing regression (5) to exhibit significant multicollinearity after including interactions that control for bank size. These measures include the number of nonzero cells in key schedules, the aggregated absolute quarterly change in the cell values of key schedules (scaled by assets), a word count of the earnings release, an indicator variable capturing derivatives usage, and an indicator variable capturing multibank BHCs.

  18. These amendments are mutually exclusive of the accounting errors corrected using cumulative effect adjustments on line 2 of Call Report schedule RI-A – Changes in Bank Equity Capital. If a bank corrects an error by amending a past report, this line on schedule RI-A would be left blank. Conversations with bank regulators indicate that more significant errors should be corrected via amendment, while less significant errors can be corrected by making a cumulative effect adjustment on schedule RI-A.

  19. Untabulated analysis shows that 93% of Y-9Cs are amended over the remainder of the quarter that we track. Only 1.5 (3.9) percent of the amendments affect the total assets balance (Tier 1 capital ratio). Similar to Call Report amendments, Y-9C amendments are most likely to occur within the two weeks after filing.

  20. To ensure that t-statistics for the difference in mean and median tests are well specified in light of the large overall sample size, we simulate a distribution of t-statistics by repeating the following randomization procedure 10,000 times. We randomly assign 2061 of the 159,002 total sample observations to a pseudo-CALL group (because there are 2061 observations in the actual CALL group) and the rest to a pseudo-non-event group. Then we compute t-statistics for the difference in mean and median RET across both groups. The resulting empirical distributions of t-statistics closely conform to the theoretical t-distribution. The empirical distribution of t-statistics for the difference-in-means (Wilcoxon) test has a 90th, 95th, and 99th percentile of 1.27, 1.65, and 2.32 (1.24, 1.62, and 2.26). The corresponding percentiles for the theoretical distribution of t-statistics are 1.28, 1.65, and 2.33. The slightly lower percentile values found in the empirical distributions indicates that in our sample it is slightly more difficult to reject the null hypothesis at the given confidence level using parametric tests.

  21. This analysis omits many EA2 and CALL1 events, which explains why CALL1 events represent only 9% of total CALL events in this sample in contrast to the 19% previously reported for the full sample. We omit CALL1, CALL2, EA1, and EA2 events from this and subsequent analyses if they are not the first two events in the sequence of the four events for the bank in a given quarter. In other words, the events are omitted if a 10-K/Q or Y-9C is among the first two events. We do not impose this limitation on CALL and EA events, which explains why the number of CALL events exceeds the number of CALL1 plus CALL2 events, and the number of EA events exceeds the number of EA1 plus EA2 events. Additionally, the counts of EA1 and CALL2 events differ due to five bank-quarters in which the 10-K/Q was released on the Call Report day or day after, causing five CALL2 events to be omitted from the sample.

  22. 65% = 0.7654 estimated EA coefficient / 1.1689 non-event day mean from the intercept.

  23. The estimate of the coefficient on CALL remains of similar magnitude and significance when excluding Call Reports filed within days (−1, +3), relative to the earnings announcement (as opposed to controlling for those days using EA_EXPANDED).

  24. Inferences are robust to two controls for potential concurrent events. First, we find that including an indicator variable equal to 1 on the 30th day of all months has little effect on the coefficient magnitude or significance of CALL. Second, we control for two specific concurrent events, Federal Open Market Committee (FOMC) statements and “advance” estimates of gross domestic product growth, which are sometimes released on or near the 30th day of the quarter. During the sample period, six of the 18 FOMC statements and four of the nine GDP announcements were released on or within a day of day 30. We re-estimate equation (3) after including two indicator variables that equal 1 on the days of FOMC statements and GDP announcements. We find that including the indicators has little effect on the magnitude or significance of the estimate of the coefficient on CALL.

  25. Earnings surprise is measured as the difference between current and four-quarters-ago Call Report earnings scaled by price.

  26. We obtained the database of BHCs from the Federal Reserve Bank of New York (http://www.newyorkfed.org/research/banking_research/datasets.html). The dataset yields 769 BHCs with stock returns available on CRSP sometime between Jan. 1, 2000, and Dec. 31, 2013.

  27. The study was covered by Bloomberg (Hamilton and Katz 2015), The Wall Street Journal Moneybeat blog (Tracy 2015), and other regional and Canadian publications. SNL Financial and Barclays Equity Research also featured the study to subscribers.

References

Download references

Acknowledgements

We appreciate helpful comments from the editor (Shiva Shivakunar), an anonymous reviewer, Anwer Ahmed, Ramji Balakrishnan, Ray Ball, Erik Beardsley, Mary Billings, Ciao-Wei Chen, Shuping Chen, Brant Christensen, Michael Clement, Dan Collins, Christine Cuny, Emmanuel De George, Yiwei Dou, Aytekin Ertan, John Gallemore, Jon Garfinkel, Pingyang Gao, Joseph Gerakos, Joao Granja, Paul Hribar, Bjorn Jorgensen, Michael Jung, Bill Kinney, April Klein, Anya Kleymenova, Sam Melessa, Christian Leuz, Rick Mergenthaler, John McInnis, Tom Omer, Mark Penno, John Pogach, Korok Ray, Pat Relich, Sarah Rice, Stephen Ryan, Steven Savoy, Jamie Schmidt, Lakshmanan Shivakumar, Doug Skinner, Ed Swanson, Senyo Tse, Connie Weaver, Jaron Wilde, Joanna Wu, Paul Zarowin, Frank Zhang, and workshop participants at the University of Texas-Austin, University of Illinois, University of Mississippi, Federal Deposit Insurance Corporation, Cambridge University, London Business School, London School of Economics, New York University, Texas A&M University, Yale Research Conference, University of Chicago, University of Iowa, and University of Nebraska. We thank Manisha Goswami, Lorie Marsh, and Bill McDonald for research assistance and John Montgomery at SNL Financial for assistance with obtaining data. We are grateful for financial support from the Center for Accounting Research and Education (CARE) at the Mendoza College of Business, the Deloitte Foundation, PricewaterhouseCoopers, and the Mendoza College of Business.

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to Jeffrey J. Burks.

Appendices

Appendix 1

1.1 Comparison of Report Line Items

Call / Y-9C Schedule

 

Call Report

Y-9C

10-K

10-Q

Notes

 

Entity level:

Bank

BHC

BHC

BHC

 

Call Report and Y-9C content: Is it included in 10-Ks or 10-Qs?

RI / HI

Income Statement

Yes

Yes

Yes

Yes

 

RI, RI-E / HI

More detail about income-related items. Includes: non-interest income items such as fees from check printing, ATM fees, card interchange fees, safe deposit box rental, postage, directors fees, advertising, consulting expenses, trading revenue, gains/losses from taking fair value option; number of employees.

Yes

Yes

Yes

Yes

 

None / HI-B

Income statement information for companies acquired during quarter

No

Yes

No

No

 

RI-A / HI-A

Statement of Changes in Stockholders’ Equity

Yes

Yes

Yes

Yes

 

RC / HC

Balance Sheet

Yes

Yes

Yes

Yes

 

RC-B / HC-B

Balances of available-for-sale (AFS) and held-to-maturity (HTM) securities (both fair value and amortized cost), broken down by security type. Security types include: Treasuries, US government agencies, states, government guaranteed mortgage-backed securities, non-government guaranteed mortgage-backed securities, commercial mortgage-backed securities, asset-backed securities, other domestic debt securities, other foreign debt securities, mutual funds and equity securities.

Yes

Yes

Yes*

Yes*

 

RC-B / HC-B

Miscellaneous information about AFS and HTM securities. Includes: Debt securities by maturity; pledged securities; sales of HTM; asset-backed securities by type (credit card, home equity, auto, other consumer, commercial); structured financial products by underlying collateral or reference asset.

Yes

Yes

Some

Some

10-Ks and 10-Qs present debt securities by maturity (FASB ASC 320–10–50-3), although the maturity categories tend to be less granular. 10-Ks and 10-Qs also sometimes present pledged securities but generally do not present the other items.

RC-D / HC-D

Trading assets and liabilities by type. Types include: Treasuries, US government agencies, states, government-guaranteed mortgage-backed securities, non-government guaranteed mortgage-backed securities, commercial mortgage-backed securities, structured financial products, loans secured by real estate, and commercial loans.

Yes

Yes

Some

Some

Even for banks that report having trading securities, 10-Ks and 10-Qs generally do not present trading assets and liabilities by type, or they use much less granular types.

RC-D / HC-D

Miscellaneous information about trading assets and liabilities: Unpaid principal balances of loans held for trading (by loan type); structured financial products held for trading (by type of collateral); asset backed securities held for trading by type.

Yes

Yes

No

No

 

RC-C / HC-C

Loans and leases by type. Types include: secured by residential construction, multifamily construction, or farmland; interbank loans; agricultural loans; commercial (foreign vs. domestic); consumer loans (credit card, revolving, other); foreign government loans; loans for purchasing and carrying securities.

Yes

Yes

Yes*

Yes*

 

RC-C / HC-C

Miscellaneous information about loans: Loans and leases involved in troubled debt restructurings, by type; maturity and repricing information for residential mortgage loans and all other mortgage loans; loans secured by real estate to non-US addresses; loans to finance land development activities; purchased impaired loans; closed-end mortgage loans with negative amortization features; mortgage loans in process of foreclosure.

Yes

Yes

Some

Some

10-Ks and 10-Qs generally present loans and leases involved in troubled debt restructurings, although types tend to be less granular. They generally do not present the other items.

RC-C / HC-C

Loans for which fair value option has been elected (broken down by loan type); unpaid principal balances of loans measured at fair value (broken down by loan type).

Yes

Yes

Yes*

Yes*

 

RC-C / HC-C

Fair value of loans/leases obtained through business combinations

Yes

Yes

Yes*

Yes*

 

RC-E / HC-E

Deposit Liabilities by type. Types include demand deposit, NOW, money market, time deposits less than $100,000, and time deposits greater than $100,000.

Yes

Yes

Yes*

Yes*

 

RC-E / HC-E

Miscellaneous information about deposits: Brokered deposits by length of maturity; time deposits by length of maturity; foreign time deposits with less than 1 year to maturity.

Yes

Yes

Some

No

10-Ks generally present time deposits by maturity. 10-Qs generally do not. The other items generally are not presented.

RC-F,RC-G / HC-F,HC-G

Other Assets and Liabilities, including accrued interest receivable, net deferred tax assets and liabilities, interest-only strips receivable, equity securities that do not have readily determinable market values, life insurance assets, allowance for credit losses on off-balance sheet exposures.

Yes

Yes

Some

Some

10-Ks and 10-Qs present deferred tax assets and liabilities and sometimes present accrued interest receivable. They generally do not present the other items.

RC-M / HC-M

General miscellaneous items, including: repo offsets; intangible assets other than goodwill; other real estate owned; other borrowed money; assets under management in proprietary mutual funds or annuities; secured liabilities.

Yes

Yes

Yes

Yes

 

RC-L / HC-L

Derivatives by type (notional and fair values). Types include interest rate, foreign exchange, equity derivative, and commodity.

Yes

Yes

Yes

Yes

 

RC-R / HC-R

Notional amounts of derivative contracts by maturity (1 year or less, 1 to 5 years, over 5 years)

Yes

Yes

No

No

 

RC-Q / HC-Q

Levels 1, 2, and 3 fair value measurements, by asset and liability type.

Yes

Yes

Yes

Yes

 

RC-K / HC-K

Quarterly averages for various types of assets and liabilities

Yes

Yes

Yes

Yes

 
 

Risk and regulatory assessments

     

RC-N / HC-N

Past due and nonaccrual loans by type. Age categories are: past due by 30 days, past due by 90 days, and nonaccrual.

Yes

Yes

Yes*

Yes*

 

RI-B / HI-B

Charge-offs and recoveries by loan type. Types include construction, farm, residential, loans to other depository institutions, commercial loans, consumer loans, leases, and foreign government loans.

Yes

Yes

Yes*

Yes*

 

RI-B / HI-B

Components of changes in the allowance for loan loss over the period

Yes

Yes

Yes

Yes

 

RC-R / HC-R

Risk weightings by asset type

Yes

Yes

No

No

 

RC-R / HC-R

Reconciliation of accounting capital to regulatory capital

Yes

Yes

No

No

 

RC-O / None

Other data for deposit insurance and FICO assessments. Includes information about deposits and risk of assets.

Yes

No

No

No

 

None / HC-H

Interest sensitivity, focusing on assets and liabilities that mature or reprice within 1 year.

No

Yes

Some

Some

10-Ks and 10-Qs cover the topic of interest rate sensitivity but tend not to present assets and liabilities that mature or reprice within 1 year.

 

Other activities and items

     

RC-P / HC-P

Residential mortgage banking activities. Volumes of mortgages originated and sold during period, by type.

Yes

Yes

No

No

 

RC-S / HC-S

Servicing, securitization, and asset sale activities by loan type. Information includes: the balance of assets sold and securitized with servicing retained or with recourse; unused commitments to provide liquidity to securitizations; past due loan amounts, charge-offs, and recoveries related to securitizations.

Yes

Yes

No

No

 

None / HC-I

Insurance-related underwriting activities, by property & casualty versus life & health. Items include: reinsurance recoverables, claims reserves, unearned premiums, total equity, and net income.

No

Yes

No

No

Even BHCs that have insurance operations tend not to report these items in 10-Ks and 10-Qs.

RC-V / HC-V

Variable interest entities. Information includes: assets and liabilities of the VIEs; assets of the VIEs that can be used only to settle obligations of the VIEs; liabilities of the VIEs for which creditors do not have recourse to the general credit of the BHC.

Yes

Yes

Some

Some

10-K and 10-Q information is generally confined to the VIEs’ total assets, total liabilities, and maximum exposure to loss.

RC-T / None

Fiduciary accounts by type. Types include personal trust, employee benefit, corporate, foundation and endowment. Dollar balances and number of accounts are reported.

Yes

No

Some

Some

10-K’s and 10-Q’s presentation of fiduciary account types tends to be much less granular.

RC-L / HC-L

Off-Balance-Sheet Items by type. Types include: lines of credit, commitments, open-end loans, letters of credit, credit derivatives like CDS, foreign exchange contracts, securities borrowed, securities lent.

Yes

Yes

Yes

Yes

 

10-K or 10-Q content that is not included in Call Reports and Y-9Cs

NA

Statement of Cash Flows

No

No

Yes

Yes

 

NA

Footnotes to the financial statements

No

No

Yes

Yes

 

NA

Non-bank segments

No

No

Yes

Yes

 

NA

Per share information

No

No

Yes

Yes

 

NA

Qualitative disclosures, including: Management’s Discussion and Analysis of Results; auditor report; governance information; internal control deficiencies.

No

No

Yes

Yes

The 10-Q does not contain an auditor report.

NA

Unrealized security gains separated from unrealized security losses, by AFS and HTM and by type.

No

No

Yes

Yes

 

NA

Rollforward of credit losses on debt securities. Includes: additions to credit losses during the period; reductions for securities sold during the period; reductions for increases in cash flows now expected to be collected.

No

No

Yes

Yes

 
  1. The above table compares the content of Call Reports, Y-9Cs, 10-Ks, and 10-Qs during the sample period. “Yes” (“No”) indicates that the report typically contains (excludes) the content. “Some” indicates that the report typically contains some of the content. (See the Notes column for elaboration.) “Yes*” indicates that the report typically contains the content but uses less granular security type or maturity categories

Appendix 2

1.1 Comparison of Report Values

Percentage differences between report values

  

Variable Name

 

Difference between 10-K/Q and Y-9C

Difference between 10-K/Q and CALL Report

Difference between Y-9C and CALL Report

  

Percentage of difference within

  

Percentage of difference within

  

Percentage of difference within

mean

median

1%

10%

50%

mean

median

1%

10%

50%

mean

median

1%

10%

50%

Income Statement

Y-9C

CALL

10-K/Q

               

Net interest income

BHCK4074

RIAD4074

NIINT

0.01

0.008

83.0%

99.2%

100.0%

0.03

0.01

37.4%

97.4%

99.5%

0.03

0.01

46.0%

97.2%

99.4%

Provision for loan losses

BHCK4230

RIAD4230

PLL

0.22

0.00

86.8%

92.0%

97.5%

0.25

0.00

85.9%

90.3%

96.5%

0.05

0.00

94.3%

96.0%

98.5%

Net income

BHCKG104

RIADG104

NI

0.02

0.00

92.0%

97.8%

99.6%

0.18

0.08

5.3%

59.9%

94.6%

0.20

0.08

5.3%

59.6%

93.6%

Balance Sheet

Loans and leases

BHCKB528

RCONB528

LG

0.00

0.00

92.2%

99.1%

100.0%

0.00

0.00

92.2%

99.4%

100.0%

0.01

0.00

95.2%

98.1%

100.0%

Allowance for loan losses

BHCK3123

RCON3123

RLL – AROL

0.01

0.00

96.3%

98.4%

100.0%

0.03

0.00

93.6%

97.8%

100.0%

0.03

0.00

94.2%

98.2%

100.0%

Total assets

BHCK2170

RCON2170

AT

0.00

0.00

99.4%

99.6%

100.0%

0.01

0.00

88.0%

99.5%

100.0%

0.01

0.00

86.4%

98.1%

100.0%

Total liabilities

BHCK2948

RCON2948

LT

0.00

0.00

99.0%

99.6%

100.0%

0.02

0.01

45.6%

99.5%

100.0%

0.02

0.01

44.4%

98.3%

100.0%

Total equity capital

BHCK3210

RCON3210

SEQ

0.00

0.00

98.9%

99.1%

100.0%

0.13

0.09

7.2%

56.3%

100.0%

0.13

0.09

7.5%

54.9%

100.0%

Tier 1 capital ratio

BHCK7206

RCON7206

CAPR1

0.00

0.00

93.2%

98.8%

100.0%

0.11

0.05

15.8%

80.8%

100.0%

0.09

0.04

15.6%

76.3%

100.0%

Total risk-based capital ratio

BHCK7205

RCON7205

CAPR3

0.00

0.00

93.5%

99.1%

100.0%

0.07

0.04

19.1%

83.9%

100.0%

0.09

0.04

16.1%

81.0%

100.0%

  1. The table above presents descriptive statistics for the percentage difference in reported values for the same line item across 10-K/Qs, Call Reports, and Y-9Cs. 10-K/Q values are obtained from Compustat. The sample is limited to single-bank BHCs, resulting in a sample of 2314 bank-quarters. Percentage difference is calculated by taking the absolute value of the difference across reports and dividing by the absolute value of the first value in the numerator. For instance, the percentage difference for 10-K/Q versus Y-9C items is |10-K/Q item – Y-9C item| / |10-K/Q item|. “Mean” (“median”) is the mean (median) percentage difference across banks. The columns labeled 1%, 10%, and 50% represent the cumulative distribution of the percentage difference. For instance, the 1% column denotes the percentage of banks that have percentage differences of 1% or less

Appendix 3

1.1 Variable Definitions

Note: “Day 30” means the 30th day of the quarter or the next trading day if the 30th day is nontrading. “Day 40” and “day 45” follow the same convention. All variables that are set equal to 1, under the conditions described below, and equal to 0 otherwise. All continuous variables are winsorized at the 1st and 99th percentile. All items beginning with “bhck,” “bhdm,” or “bhfn” come from Federal Reserve Y-9C reports. All items beginning with “rcon” or “riad” come from Call Reports.

ASSETS = total assets (bhck2170) at the beginning-of-quarter.

A_CALL = 1 if the date is day 30.

A_Y9C = 1 if the date is day 45 (40) of the fourth (interim) quarter.

CALL = 1 if the date is the Call Report release date.

CALL1 = 1 if CALL = 1 and the Call Report precedes the earnings announcement.

CALL2 = 1 if CALL = 1 and the Call Report follows the earnings announcement.

CALL_30 = 1 if CALL = 1 and the bank’s Call Report is released on day 30.

CALL_NON30 = 1 if CALL = 1 and the bank’s Call Report is not released on day 30.

DAYX = 1 on the designated day (e.g., DAY25, DAY26) for banks whose Call Reports are not released on that day.

DAY30_CALL_ALREADY = 1 on day 30 for banks whose Call Reports are released before day 30.

DAY30_CALL_NOTYET = 1 on day 30 for banks whose Call Reports are released after day 30.

EA = 1 if the date is an earnings announcement date.

EA1 = 1 if EA = 1 and the earnings announcement precedes the Call Report.

EA2 = 1 if EA = 1 and the earnings announcement follows the Call Report.

EA_EXPANDED = 1 on days −1 and (+1, +3) relative to earnings announcement dates.

LogASSETS = natural log of ASSETS.

LOSS = 1 if the bank reported negative earnings (bhckg104) in quarter q.

LOW_CR = 1 if the bank’s Tier 1 capital ratio (bhck7206) is in the lowest 10% of the sample, zero otherwise.

LTGAP = the absolute difference between long term earning assets, excluding securities, and long-term financial liabilities, scaled by market value of equity (CSHPRQ*PRCCQ from Compustat) and divided by 100. Long-term earning assets excluding securities are computed as bhck0395 + bhck0397 + bhck1754 + bhck1773 + bhdmb987 + bhckb989 + bhckb528 - bhck5526 - bhck3197 - bhck0384 - bhck0387 - bhcka511. Long-term financial liabilities are computed as bhdm6636 + bhfn6636 + bhck3190 + bhck4062 + bhckc699 - bhck3296 - bhck3298 - bhck3409.

RET = \( \frac{\sum_{t=0}^1\mid {R}_{it}-{R}_{Mt}\mid }{E\left(\sum \limits_{t=0}^1|{R}_{it}-{R}_{Mt}|\right)} \), where the numerator is bank i’s cumulative absolute market-adjusted return over days 0 and 1 and the denominator is the mean of this same measure during the last month of the previous quarter. RMt is the market value-weighted return, excluding bank stocks, computed from the CRSP individual daily stock file, after excluding commercial banks (NAICS code 5221).

RC-D = 1 (0) if the bank has greater than $0 and less than or equal to $4 million in trading assets (rcon3545) and has nonmissing (all missing) values in schedule RC-D. Variables in schedule RC-D include: rcon3531, rcon3532, rcon3533, rcong379, rcong380, rcong381, rconk197, rconk198, rcong383, rcong384, rcong385, rconf604, rcong386, rconf605, rconf606, rconf607, rconf611, rconf612, rconf613, rconf614, rconf618, and rcon3541.

RC-P = 1 (0) if the bank has between $1.5 billion and $2.5 billion in total assets and has nonmissing (all missing) values in schedule RC-P. Variables in schedule RC-P include: rconf066, rconf 067, rconf 670, rconf 671, rconf 068, rconf 069, rconf 672, rconf 673, rconf 070, rconf 071, rconf 674, rconf 675, rconf 072, rconf073, rconf676, rconf677, riadf184, riadf560, rconf678, rconf679, rconf680, rconf681, rconl191, rconl192, and rconm288.

VOL = \( \sum \limits_{t=0}^1\left[\frac{V_{it}}{Shs_{it}}\right]/E\left(\sum \limits_{t=0}^1\left[\frac{V_{it}}{Shs_{it}}\right]\right) \), where Vit is bank i’s trading volume on day t and Shsit is bank i’s shares outstanding on day t. The numerator is bank i’s share turnover (Vit / Shsit) over days t and t + 1. The denominator is the mean of this same measure during the last month of the previous quarter.

Y9C = 1 if the date is a Y-9C release date.

∆CHRG_OFF = the absolute difference in charge-offs as a percentage of loans and leases (bhck4635/bhckb528) in quarter q minus the same quantity in quarter q-1.

∆E = the absolute difference in earnings (bhck4340) in quarter q minus earnings in quarter q-4, scaled by market value of equity (cshoq*prccq).

∆LL = the absolute difference in allowance for loan and lease losses as a percentage of loans and leases (bhck3123/bhckb528) in quarter q minus the same quantity in quarter q-1.

10KQ = 1 if the date is a 10 K/Q filing date.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Badertscher, B.A., Burks, J.J. & Easton, P.D. The market reaction to bank regulatory reports. Rev Account Stud 23, 686–731 (2018). https://doi.org/10.1007/s11142-018-9440-8

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11142-018-9440-8

Keywords

JEL classification

Navigation