Deposit insurance and credit union earnings opacity

Lemonia M. Rempoutsika; Dimitris Chronopoulos; Linh  Nguyen; John Ogilvie Stephen Wilson

doi:10.1016/j.bar.2024.101486

Deposit insurance and credit union earnings opacity

Lemonia M. Rempoutsika, Dimitris Chronopoulos, Linh Nguyen, John Ogilvie Stephen Wilson^*

^*Corresponding author for this work

Finance (Business School)

Research output: Contribution to journal › Article › peer-review

Abstract

This study examines the impact of deposit insurance coverage on credit union earnings opacity. For identification, we employ the provisions outlined in Section 136 of the Emergency Economic Stabilization Act, which raised the upper limit of deposit insurance coverage from $100,000 to $250,000. Using variation in insured deposits brought about by the differential impact of the change to deposit insurance arrangements and a difference-in-differences approach, we find that credit unions experiencing a substantial rise in insured deposits tend to exercise more discretion over loan loss provisions, leading to an increase in earnings opacity. This is most evident for small and medium sized credit unions.

Original language	English
Article number	101486
Number of pages	15
Journal	British Accounting Review
Volume	56
Issue number	6
Early online date	23 Sept 2024
DOIs	https://doi.org/10.1016/j.bar.2024.101486
Publication status	Published - 1 Nov 2024

Keywords

Deposit insurance
Earnings opacity
Credit unions
Discretionary loan loss provisions
Emergency Economic Stabilization Act

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10.1016/j.bar.2024.101486Licence: CC BY

Rempoutsika_2024_BAR_Deposit-insurance-credit-union-earnings-opacity_CC
Copyright © 2024 The Author(s). Open Access: This is an open access article distributed under the terms of the Creative Commons CC-BY license (https://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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Cite this

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abstract = "This study examines the impact of deposit insurance coverage on credit union earnings opacity. For identification, we employ the provisions outlined in Section 136 of the Emergency Economic Stabilization Act, which raised the upper limit of deposit insurance coverage from $100,000 to $250,000. Using variation in insured deposits brought about by the differential impact of the change to deposit insurance arrangements and a difference-in-differences approach, we find that credit unions experiencing a substantial rise in insured deposits tend to exercise more discretion over loan loss provisions, leading to an increase in earnings opacity. This is most evident for small and medium sized credit unions.",

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Deposit insurance and credit union earnings opacity

Abstract

Keywords

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