Better bankruptcies for banks
Good accounting isn’t just a hallmark of a well-run company: As a new study of the banking industry by an MIT professor shows, transparent financials help ensure stability when banks fail, and can even reduce costs for consumers or taxpayers when the government must oversee the bankruptcies of financial firms.That has happened a lot lately, especially during the recent economic and financial crisis: From 2008 through 2010, the U.S. government was forced to act as the liquidating agent for more than 300 banks. But as MIT accounting professor Joao Granja shows in a newly published paper, the banks with better disclosure practices received higher bids for their assets, and regulators were able to conduct those liquidations more cheaply. Overall, Granja finds, failing banks that had filed documents with the Securities and Exchange Commission (SEC) saw a 7.8 percentage point increase in the portion of their assets bought by other firms...