Evidence on the Efficacy of Interest-Rate Risk Disclosures by Commercial Banks
By Anwer Ahmed, A. Beatty, B. Bettinghaus
January 2004
The International Journal of Accounting, Vol. 39
Abstract
This paper documents evidence on the efficacy of maturity-gap disclosures of commercial banks in indicating their net interest income that is exposed to interest-rate risk. For the large sample of banks that filed call reports from 1990 to 1997, a period that includes a wide range of interest rate movements, the researchers find that: 1. 1-year maturity gap measures are significantly related to the 1-year- and 3-years-ahead change in net interest income, 2. fixed-rate and variable-rate instruments differ in explanatory ability, and 3. the 1-to-5-year aggregate gap measures also have some power in explaining 3-year-ahead changes in net interest income. These findings hold after controlling for the ex post growth in assets as well as the amount of rate-sensitive assets and liabilities (a competing set of explanatory variables).