Skip to main content
eScholarship
Open Access Publications from the University of California

Assessing Accrual Quality in Financial Institutions

  • Author(s): Uysal, Aydin
  • Advisor(s): Sloan, Richard G
  • et al.
Abstract

This paper provides a framework for assessing the accrual quality of financial institutions and applies it to commercial banks' loan portfolios. I first develop an accrual reliability categorization for financial institutions and show that existing findings for non-financial firms extend to financial firms. I next demonstrate how supplementing the information in accruals leads to significantly improved assessment of accrual quality. Focusing on commercial banks' loan portfolios, I supplement information in accruals with a measure based on footnote disclosures regarding loan portfolio concentrations and regional economic indicators. I call this measure loan portfolio quality index and show that it further isolates less reliable accruals and significantly improves the forecasting of future earnings and stock returns.

Main Content
Current View