Determinants of the use of regulatory accounting principles by Savings and Loans

Abstract

The voluntary use of regulatory accounting principles (RAP) by Savings and Loans (S&Ls) is predicted to be related to ownership structure, proximity to violation of net worth requirements, political factors, and prior use of RAP. We examine the decisions to both adopt and retain the use of several RAP: two ‘cosmetic’ RAP that are relatively independent of other economic decisions and two ‘noncosmetic’ RAP that directly interact with investment or financing decisions. S&Ls using RAP tend to: (a) be mutuals, (b) have low regulatory net worth, (c) be larger (for S&Ls adopting RAP), and (d) have used other RAP in the prior period.