Journal of Business & Economic Policy

Institutional Intervention as a Substitute for Learning by Teaching: Evidence using Bank Risk Forecasting Capabilities
Sara Ryoo, KyongsunHeo

Abstract
This paper examines how institutional intervention can replace learning by teaching effects in the context of mergers and acquisitions. In doing so, we posit that performance differences between parent and target firms in bank mergers are associated with learning effects within the parent firm. Using U.S. banking industry data, we conducted a quasi-natural experiment to show that the implementation of the 2004 Basel Accord substitutes learning by teaching effects. Our findings show that parent firms with higher financial performance levels compared to acquired firms achieved timelier loan loss provisioning after a corporate merger. Further, we found this forward-looking accounting capability can be replicated by lower performing parent firms provided they follow the Basel Accord guidelines. This paper highlights pragmatic considerations for firm managers involved in training new employees and sheds light on a potential learning-by-teaching mechanism for organizational management researchers to further investigate.

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