Issue Information

Published date01 July 2019
Date01 July 2019
VOLUME 30, NUMBER 3 July 2019
Editorial Review
5Is yield curve predicting a US recession in 2020?
Damir Tokic
The yield curve spread has predicted every US recession. As of mid-2019, the inverted yield
curve spread is flashing a warning sign about a possible US recession in 2020. This article
explains the yield curve spread, and discusses the possible 2020 recession triggers.
Blind Peer Reviews
8The effect of insured liabilities on the demand for external audits: The case of privately-
held United States banks
Jamie Hoelscher, Brad J. Reed, and Gregory Sierra
We examine the relationship between government insurance for bank deposits and bank
management's voluntary audit choice for a set of privately-held U.S. banks. Unlikely
publicly-traded banks, U.S. regulations do not require private banks to obtain annual audits.
However, all U.S. banks have the feature of insurance on customer deposits that is provided by
the Federal Deposit Insurance Corporationthese insured customer deposits comprise a
significant portion of the debt of most banks. Consistent with prior research we find that the
voluntary choice to be audited is positively related to agency costs as measured by the size of
bank assets. Our results show a negative association between a bank's insured deposits and the
choice to be audited but (consistent with prior literature) a positive association with uninsured
liabilities. In addition, we hypothesize and find that the bank's voluntary audit choice is
positively related to the bank's growth rate and related to the bank's primary federal regulator.
Taken together, these findings are consistent with the notion that audits create value primarily
for uninsured depositors and have implications for bank managers, their customers, and

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