The benefits of banks’ IT investments in times of trouble: evidence from loan loss accruals during the COVID-19 pandemic

Abstract Motivated by diverging results from the literature, we investigate whether investments in information technology (IT) help banks to assess their loan portfolio. More specifically, focus on consequences of accumulated expenses for data processing banks’ ability estimate loss accruals. We further test differences when borrowers get hit economic trouble COVID-19 pandemic. Using a sample US commercial before and during pandemic, find more precise estimates accruals these troublesome times that higher expenses. Surprisingly, do not significant precision IT normal times. Our findings contribute consolidate previously showing following structural break, such as