Disclosure Practices In The Savings And Loan Industry: A Test Of The Signaling Hypothesis

Savings and loan institutions (S&Ls) have been able to use specialized regulatory accounting practices (RAP) which typically are more liberal than generally accepted accounting principles (GAAP). This paper examines whether differences exist between S&Ls which disclosed a reconciliation of their RAP and GAAP net worths and S&L which did not. It is predicted that the financially strongest S&Ls would be most likely to disclose this information. Reported results support this signaling hypothesis.