The Effects of Accounting Regulations on Stock Valuation and Volatility: Evidence from the Banking Industry

• In Event: Auditing and financial accounting: Skepticism and Forecasting
  In Dialogue Session: Auditing and Financial Accounting: Skepticism and Forecasting

Abstract

The purposes of bank accounting regulations are not only to regulate banks to disclose useful financial information to outside investors, which is similar to the purposes of the general reporting standards for the business firms, but also to avoid the failure of the banking industry (Bushman and Williams, 2012; Rochet, 2005). Using the sample including major banks from 37 countries, this paper investigates how accounting regulations affect stock valuation and volatility. The evidence shows that bank stocks have higher valuation and lower volatility in countries with greater regulations on the quality of external audits and the transparency of financial statements. This study presents a comprehensive picture about the effects of accounting regulations on the stock market.

Author

• Liang Song, Michigan Tech University