Essays in Bank Accounting and Regulation

Abstract

This dissertation comprises of two essays on the accounting rules and regulations. The first essay explores the accounting rules for bank loan loss recognition. Motivated by the FASB's new proposal that introduces an expected loss methodology for recognizing losses, it examines two questions that are related to the current GAAP and the new accounting rule. It develops an empirical model of loan loss prediction from the machine learning literature, and shows that it outperforms current GAAP. It then demonstrates the value of expanding the inputs to the model, as proposed by the new rule. Finally, it examines the drivers of the performance difference between the developed model and the current GAAP. The second essay studies the regulation around shareholder activism and the proposals that they submit for firms. In particular, it considers the proposals that managers seek to exclude from the proxy statement. Using a hand-collected data set of SEC ``no-action'' letters, it documents that the shareholder proposal mechanism has a broader set of components than that considered by prior research, and provides a number of empirical regularities. It further documents that shareholder proposals are part of a larger mosaic of shareholder intervention in companies that often go together.