Loan-loss provisions, earnings management, and capital management by Russian banks: the impact of changes in banking regulation and oversight

2020 ◽  
Author(s):  
Egor Nikulin ◽  
Jeff Downing
Keyword(s):  
Earnings Management ◽  
Banking Regulation ◽  
Capital Management ◽  
Loan Loss ◽  
Loan Loss Provisions ◽  
The Impact

Earnings management and evolution of the banking regulation

2015 ◽  
Vol 5 (2) ◽  
pp. 150-169 ◽  
Author(s):  
Sarra Hamza Elleuch ◽  
Nelia Boulila Taktak
Keyword(s):  
Earnings Management ◽  
Management Practices ◽  
Mixed Model ◽  
Banking Regulation ◽  
Loan Loss ◽  
Content Type ◽  
Loan Loss Provisions ◽  
Qualitative Approaches ◽  
The Impact ◽  
The Imf

Purpose – The purpose of this paper is to examine the earnings management practices of Tunisian banks after the publication of the first International Monetary Fund (IMF) report (2002) over the period 1998-2007. Design/methodology/approach – The study relies on a mixed model that combines both the quantitative and qualitative approaches. First of all, we use the quantitative method to measure the discretionary loan loss provisions based on the model of Cornett et al. (2009), and then we validate the quantitative findings by using the interview approach. Findings – Since 2005, Tunisian banks have resorted less and less to accounting earnings management through the loan loss provisions, but conversely, real earnings management has been revealed instead by the sale of investment securities and the use of debt collection agencies. Despite the IMF recommendations, Tunisian banks continue to manage their earnings by changing only their strategies. Practical implications – The findings of this study show that the regulation cannot avoid earnings management. Even if the regulation limits the discretion of the manager, the latter finds new alternatives to manipulate the earnings. Originality/value – This is the first study that analyses the impact of the IMF recommendations on earnings management in an emerging economy.

scholarly journals Does the New European Banking Regulation discourage Earnings Management?

2017 ◽  
Vol 10 (10) ◽  
pp. 45 ◽  
Author(s):  
Giuseppe Di Martino ◽  
Grazia Dicuonzo ◽  
Graziana Galeone ◽  
Vittorio Dell'Atti
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Banking Sector ◽  
Banking Regulation ◽  
Regulatory Framework ◽  
Loan Loss ◽  
Minimum Capital ◽  
Loan Loss Provisions ◽  
European Banking ◽  
Single Rulebook

In the recent past, the financial crisis has shown important lacks in the EU regulation relating to the banking sector, making the introduction of a unified regulatory framework necessary. Since June 2009 the European Council has recommended a “Single Rulebook”, that is a unique and harmonizing discipline applicable to all financial institutions in the Single Market, become effective on January 2014. This prudential discipline requires much more minimum capital, liquidity and information transparency and it defines format and minimum standards of contents.The aim of this research is to investigate the relation between the new mandatory disclosure and earnings management policies in banking sector realized through Loan Loss Provisions (LLP), the component of income statement mainly subject to manipulations, especially in form of earnings smoothing. Because the new integrated regulatory framework requires a more transparent disclosure, we expected that accruals manipulation (basically LLP) could be discouraged. The empirical analysis is based on a sample of 116 listed European banks over the period prior (2011-2012-2013) and after (2014-2015-2016) the effective date of the Single Rulebook. The evidence confirm our hypothesis suggesting that this banking reform discourages earnings manipulation and improves earnings quality, making financial reporting more useful for investors. The results are important to the regulatory institutions (such as European Union and European Central Bank) supporting more stringent discipline introduced by Basel III.

Loan Loss Provisions and Earnings Management in Malaysian Banking Industry

2013 ◽  
Vol 1 (1) ◽  
pp. 93-104
Author(s):  
Hasni Abdullah ◽  
Imbarine Bujang ◽  
Ismail Ahmad
Keyword(s):  
Earnings Management ◽  
Commercial Banks ◽  
Global Financial Crisis ◽  
Banking Industry ◽  
Least Square ◽  
Capital Management ◽  
Loan Loss ◽  
Macroeconomic Factors ◽  
Ordinary Least Square ◽  
Loan Loss Provisions

Objective The main purpose of the study is to investigate the presence of earnings management incentive in affecting the LLP decision of commercial banks in Malaysia, focusing on the relation between loan loss provisions and earnings before tax and provisions. Methodology/Technique This study applies the pooled Ordinary Least Square model in assessing the determinants of the LLP. Findings The empirical findings clearly indicate that the LLP in Malaysian commercial banks is affected by earnings management for that particular period Type of Paper: Empirical paper Novelty : The expansion of the existing research in Malaysia in order to examine the extent to which the Malaysian banks engage in earnings and capital management, extends the period of investigation by considering the recent global financial crisis 2007-2009. Keywords: Loan Loss Provisions; Earnings Management; Capital Management; Macroeconomic Factors; Commercial Banks.

scholarly journals Does banking oversight make financial statements more reliable? An analysis through countries which are part of the Single Supervisory Mechanism (SSM)

2019 ◽  
Vol 16 (3) ◽  
pp. 36-51
Author(s):  
Giacomo Ceccobelli ◽  
Alessandro Giosi
Keyword(s):  
Earnings Management ◽  
Banking Industry ◽  
Financial Statements ◽  
Income Smoothing ◽  
Capital Management ◽  
Loan Loss ◽  
Single Supervisory Mechanism ◽  
Loan Loss Provisions ◽  
Regulation And Supervision ◽  
Bank Regulation And Supervision

The purpose of this research is to investigate earnings management purposes in the banking industry via loan loss provisions using a sample of 156 banks from 19 European countries under the Single Supervisory Mechanism (SSM) over the period 2006-2016. Using regression analysis, banks are tested for income smoothing, capital management, and signaling purposes. This study contributes to the literature exploring the relationship between accounting quality and earnings management objectives by analyzing which one of the latter is the more important determinant. The hypotheses of income smoothing and signaling are strongly approved since loan loss provisions consist as a tool for smoothing the amount of net profit and to convey private information to the market; on the contrary, the capital management purpose is not supported. Additionally, the analysis finds that non-discretionary components of loan loss provisions (essentially non-performing loans) have played an important role, especially during the financial crisis. Furthermore, the research is aimed at investigating the peculiar regulatory and supervisory environment in the banking industry on the basis of a set of indexes included in the “Bank Regulation and Supervision Survey”, carried out by the World Bank. Unlike previous literature, this study takes into account the latest release of the survey, emphasizes the role of an on-site inspection as the main supervisory tool and extends the analysis of the interaction between bank regulation and supervision and earnings management. The results demonstrate that such controls can influence the behaviour of bank managers in terms of income smoothing and signaling practices. Therefore they can be considered as effective instruments for reducing banks’ management accounting discretion, making financial statements more reliable.

Risk Assessment and Earning Management in Banking of Indonesia: Corporate Governance Mechanisms

2016 ◽  
Vol 4 (1) ◽  
pp. 01-07
Author(s):  
Trinandari Prasetya Nugrahanti
Keyword(s):  
Risk Assessment ◽  
Corporate Governance ◽  
Earnings Management ◽  
Management Practices ◽  
Banking Sector ◽  
Loan Loss ◽  
Loan Loss Provisions ◽  
Corporate Governance Mechanisms ◽  
The Impact

Objective - The aim of this study to investigate the impact of risk assessment using the risk inherent and quality implementation of quality risk management in the operational activities of banking operations to earnings management practices through loss loan provisions and examine whether the mechanism of corporate government bank covering structure of corporate governance and quality of corporate governance can reduce the impact increase in earnings management in Banking sector of Indonesian. Methodology/Technique - We used data pooled from 2012 through 2014. By exploring the purposive sampling method, the 36 banking listed on the Stock Exchange Indonesian were selected as a sample of this study. A panel data multivariate regression methodology is used. Findings - The result of this study that (1) risk assessment strengthens the decrease in the earning management implementation after the adoption of IFRS in IAS 39; (2) corporate governance mechanisms can weaken the decrease in the earnings management practices through loan loss provisions. The final conclusions are IFRS in IAS No. 39 and Basel II Accord generally evidence to improve in bank's financial report quality. Novelty - This study could not find an empirical evidence on the impact of corporate government mechanisms covering structure of corporate governance and quality of corporate governance can reduce the increase in earnings management in banking sector of Indonesian Type of Paper - Empirical Keywords: Risk Assessment, Corporate Governance, Earnings Management, Loan Loss Provisions.

scholarly journals Discretionary loan loss provision in the Moroccan banking sector: The role of governance mechanisms

2021 ◽  
Vol 2 (2) ◽  
pp. 191-208
Author(s):  
Yousra El Mokrani ◽  
◽  
Issam El Idrissi ◽  
Youssef Alami ◽  
◽  
...  
Keyword(s):  
Earnings Management ◽  
Banking Sector ◽  
Gender Diversity ◽  
State Ownership ◽  
Governance Mechanisms ◽  
Loan Loss ◽  
Board Diversity ◽  
Loan Loss Provisions ◽  
Corporate Governance Mechanisms ◽  
The Impact

Abstract Purpose: The present paper aims to examine the impact of corporate governance mechanisms on earnings management extent in the Moroccan banking sector. Research methodology: This research investigates the relationship between listed banks' governance mechanisms and earnings management in the CSE over the period 2017-2020. This study relies on a two-step quantitative approach, which consists firstly of estimating discretionary loan loss provisions to measure EM, then presenting the association between banks’ governance mechanisms and discretionary loan loss provisions. Results: The findings indicate that board size, gender diversity, audit committee’s independence, and state ownership constraint EM practices among the Moroccan listed banks. While other governance mechanisms, such as institutional ownership and board activity, seem to have no significant effect on restraining managers’ discretionary behavior. Limitations: Many qualitative and quantitative factors could influence discretionary loan loss provisions and not only the used variables in this research. Contribution: This research reveals the need to maintain the vigilant supervision of the regulatory framework to limit these opportunistic practices in the local banking industry. Also, our study has important implications for establishing a new set of governance requirements such as board diversity in Morocco.

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