SEC Supervisory Activity in the Financial Industry

2018 ◽  
Vol 35 (3) ◽  
pp. 607-636 ◽  
Author(s):  
Angela Pettinicchio
Keyword(s):  
Financial Crisis ◽  
Financial Institutions ◽  
Historical Data ◽  
Financial Industry ◽  
Loan Loss ◽  
Crisis Period ◽  
Research Division ◽  
Loan Loss Provisions ◽  
Asymmetric Attitude ◽  
The Way

This study documents a higher incidence of SEC Comment Letters among financial institutions characterized by abnormal levels of loan loss provisions (LLPs). In particular, results show that this effect is stronger for banks overestimating LLPs, suggesting an asymmetric attitude of the SEC Research Division toward overestimations compared with LLPs underestimations, especially in the pre-financial crisis period. Finally, the study demonstrates that after receiving a Comment Letter by the SEC, financial institutions change the way they account for LLPs by basing their computation more on historical data, thereby reducing the level of discretion embedded in their calculation.

scholarly journals Discretionary provisioning practices among Western European banks

2017 ◽  
Vol 9 (1) ◽  
pp. 109-118 ◽  
Author(s):  
Peterson K. Ozili
Keyword(s):  
Financial Crisis ◽  
Credit Risk ◽  
Income Smoothing ◽  
Least Square ◽  
Loan Loss ◽  
Content Type ◽  
Crisis Period ◽  
Loan Loss Provisions ◽  
European Banks ◽  
Western European

Purpose The purpose of the study is to investigate whether discretionary ‘loan loss provisioning’ by Western European banks is driven by income smoothing or credit risk considerations. Design/methodology/approach To test the income smoothing hypothesis, the study uses ordinary least square regression to examine the relation between loan loss provisions and earnings before tax and loan loss provisions in the post-financial crisis period. Findings The authors find evidence that discretionary provisioning by Western European banks is driven by income smoothing incentives in the post-financial crisis period, particularly, among listed banks. Also, it is observed that discretionary provisioning is significantly influenced by credit risk factors, mainly, non-performing loans and loan growth. Also, it is found that discretionary provisioning by Western European banks is procyclical with fluctuations in the economic cycle. Overall, the implication of the findings is that discretionary provisioning among Western European banks is driven by both income smoothing and credit risk considerations. Originality/value This study focus on banks in Western Europe in contrast to prior European studies.

scholarly journals The Embellishment of Bottom Line through Hyperbole of Accrued Earnings: A Case of Deliberate Earnings Management of a Non-bank Financial Institution Enlisted in Dhaka Stock Exchange and Chittagong Stock Exchange

2016 ◽  
Vol 2 (4) ◽  
pp. 42
Author(s):  
Md. Thasinul Abedin
Keyword(s):  
Financial Institutions ◽  
Positive Impact ◽  
Financial Institution ◽  
Stock Exchange ◽  
Loan Loss ◽  
Accounts Receivable ◽  
Loan Loss Provision ◽  
Loan Loss Provisions ◽  
Accrued Earnings ◽  
The Impact

The study has tried to find out the key parameters through which a non-bank financial institution can embellish its earnings. The study has found that loan loss provisions increases in line with the increase in loan and advances and interest suspense. Moreover, non-bank financial institutions always report other assets except accounts receivable figure which foreshadows an existence of deliberate inflation of earnings. The study has found a positive impact of total loan loss provisions and interest suspense on accrued income, a clear message that non-bank financial institutions always report more accrued earnings to safeguard their profit. Increase in accrued income in line with total loan loss provision and interest suspense is also validated by increase in accrued income with respect to other assets except accounts receivable figure even though the impact of other assets on accrued income is insignificant at 5% level, an accounting channel through which excess other assets except accounts receivable would be inflated for excess increase in accrued income. The study has deduced that other assets except accounts receivable is a reserve bank for discretionary inflation of earnings even though it is insignificant. The study has used time series monthly data of International Leasing and Financial Services Limited, a non-bank financial institution from 2009-2015 reported in the Statement of NBDC sent to Bangladesh Bank each month. Two-time series models have been used in this study. The first model has tried to find out the impact of loan and advances, interest suspense, and other assets except accounts receivable on total loan loss provision. In the first model, there is a significant impact of loan and advances, interest suspense, and other assets except accounts receivable on total loan loss provision. The second model has tried to discern the impact of total loan loss provision, interest suspense, and other assets on accrued income along with other independent variables namely-loan and advances, total fixed assets, and operating income. The study has found a significant positive impact of total loan loss provision and interest suspense on accrued income and insignificant impact of other assets except accounts receivable on accrued income. For both models, there is no long-run relationship among the variables.

scholarly journals Efficiency of Domestic and Foreign Banks in Thailand Since the Asian Financial Crisis

2008 ◽  
Author(s):  
Tosporn Chotigeat
Keyword(s):  
Financial Crisis ◽  
Financial Services ◽  
Time Series Data ◽  
Financial Time Series ◽  
Full Range ◽  
National Level ◽  
Foreign Banks ◽  
Series Data ◽  
Loan Loss ◽  
Loan Loss Provisions

During the 1990’s, two simultaneous phenomena had converged, greatly changing the financial services industry in Thailand. At the national level, Thai banks had to restructure in response to the financial reforms implemented as a result of the financial crisis of 1997. At the global level, large multinational banks were taking advantage of worldwide, financial deregulation and rapid technological advances by offering a full range of financial products and services in order to fiercely compete, both domestically and globally. Using quarterly financial time-series data of domestic and foreign banks in Thailand from 1997 to 2003, this paper seeks to analyze the cause of their efficiency. The findings indicate that both the efficiency ratio and loan loss provisions influenced the negative performance of domestic banks, while only loan loss provisions had negatively influenced the performance of foreign banks.  

Downside Risk Analysis of Returns Financial Institutions of Pakistan

2018 ◽  
Vol 1 (1) ◽  
pp. 1 ◽  
Author(s):  
Abdul Rashid ◽  
Aniqa Mehmood
Keyword(s):  
Financial Crisis ◽  
Stock Returns ◽  
Financial Institutions ◽  
Significant Risk ◽  
Capital Budgeting ◽  
Cross Sectional ◽  
Crisis Period ◽  
The Cost ◽  
Rate Of Returns ◽  
The Empirical Analysis

This study empirically tested the standard CAPM and DR-CAPM to examine the cross-sectional variation in stock returns of financial institutions listed at PSE over the period 2002-2016. The analysis is also performed for three sub-periods: pre-financial crisis period (2002-2005), during- financial crisis period (2006-2009), and post-financial crisis period (2010-2016). The empirical analysis is carried out following the two-pass regression analysis of Fama & Macbeth (1973). The results of the study suggest that the standard CAPM is not suitable for calculating the risk and required rate of returns for Pakistani financial institutions. To examine the validity of DR- CAPM, we estimate the downside beta developed by Bawa and Linderberg (1977), Fishburn (1977), Harlow and Row (1989), and Estrada (2002). Out of these models, the DR-CAPM of Fishburn (1977) appeared to be more appropriate for calculating required rate of returns. The DR-CAPM of Harlow and Row (1989) also provides evidence of a positive and statistically significant risk-return relationship in most of the examined sub-periods. However, the results for Estrada (2002) are inconclusive at best, suggesting that the downside beta of Estrada (2002) is an inefficient measure of risk. The results help investors in identifying an appropriate and suitable measure of risk for financial institutions of Pakistan, which, in turn, enables the investors to design an efficient and well-diversified portfolio. The results are also of great significance to managers of financial institutions as they help them in making capital budgeting decisions and calculating the cost of equities.

scholarly journals The Disruptive Effect of Distributed Ledger Technology and Blockchain in the over the Counter Derivatives Market

Global Jurist ◽  
2020 ◽  
Vol 20 (2) ◽  
Author(s):  
Adolfo Paolini
Keyword(s):  
Financial Crisis ◽  
Financial Institutions ◽  
Innovative Technology ◽  
Disruptive Effect ◽  
Financial Instruments ◽  
Over The Counter ◽  
Distributed Ledger ◽  
Distributed Ledger Technology ◽  
Financial Transactions ◽  
The Way

AbstractThe market for derivatives is substantially different after the 2007/08 financial crisis. Trust fuels business yet the financial crisis undermined this concept and customers lost faith in financial institutions. The then dichotomy, faced by innovators, was to insist with a system based on trust in financial institutions, or explore others where neither trust nor banks, as intermediaries, were indispensable for the successful and safe completion of financial transactions. The aim of this piece of research is to analyse to what extent innovative technology would change the way the ‘Over The Counter’ (OTC) market operates by providing investors with a trustworthy platform for the efficient assessment of the risk behind certain financial instruments. Consequently, the market may not be caught by surprise when another financial crisis strikes.

scholarly journals THE SIGNIFICANCE OF RISK MANAGEMENT FOR BANKS AND OTHER FINANCIAL INSTITUTIONS

2016 ◽  
Vol 4 (4) ◽  
pp. 74-81
Author(s):  
Roya Safari ◽  
Mahboubeh Shateri ◽  
Hamid ShateriBaghiabadi ◽  
Noosha Hozhabrnejad
Keyword(s):  
Risk Management ◽  
Financial Crisis ◽  
Literature Review ◽  
Financial Institutions ◽  
Rapid Growth ◽  
Global Financial Crisis ◽  
Key Factors ◽  
Financial Industry ◽  
Management Reform ◽  
Risk Management System

Risk management is an area that is experiencing rapid growth and it entails many and various perspectives and views of factors that are involved, how they are conducted and their uses. As a consequence of global financial crisis, regulators and financial industry leaders agree on the need for a comprehensive risk management reform in the financial field. Even though solutions may differ, most agree that the lack of an appropriate risk management system was one of the key factors in causing the financial crisis. This paper provides a literature review on sound risk management governance for banks and other financial institutions.

Impression Management Strategies in the Chairmen's Statements

2019 ◽  
pp. 199-215
Author(s):  
Jonas da Silva Oliveira ◽  
Graça Maria do Carmo Azevedo ◽  
Stéphanie Fernandes Pinheiro ◽  
Maria Fátima Ribeiro Borges
Keyword(s):  
Content Analysis ◽  
Financial Crisis ◽  
Organizational Performance ◽  
Impression Management ◽  
Financial Institutions ◽  
Management Strategies ◽  
Annual Reports ◽  
Crisis Period ◽  
The Individual ◽  
The Impact

This chapter assesses the influence of organizational performance in the adoption of impression management strategies in the Chairmen's statements of the Portuguese financial companies. It also evaluates the impact of the financial crisis on the adoption of impression management strategies. To this end, and using the content analysis of the Chairmen's statements included in the individual annual reports for 2006-2012 of 27 financial institutions, the authors conclude that even throughout the financial crisis period, Portuguese financial companies did not tend to adopt more impression management strategies. However, they have seen that in some years there is some evidence of its adoption.

Institutional Ownership and Income Smoothing by Japanese Banks through Loan Loss Provisions

2009 ◽  
Vol 12 (02) ◽  
pp. 219-243 ◽  
Author(s):  
Wikil Kwak ◽  
Ho-Young Lee ◽  
Vivek Mande
Keyword(s):  
Corporate Governance ◽  
Financial Institutions ◽  
Positive Relationship ◽  
Institutional Ownership ◽  
Income Smoothing ◽  
Bank Loan ◽  
Loan Loss ◽  
Significant Positive Relationship ◽  
Loan Loss Provisions ◽  
Institutional Owners

This paper examines the association between institutional ownership and income smoothing through bank loan loss provisions for a sample of Japanese banks during the period 1991–1999. We find that as the percentage of institutional ownership of banks increases, income smoothing via loan loss provisions increases. Additional tests show that there is a significant positive relationship between the extent of income smoothing and the percentage ownership of banks by domestic financial institutions and affiliated (keiretsu) institutions. Consistent with the idea that foreign institutional holders do not play an important role in the corporate governance of Japanese banks, we do not find a significant association between foreign institutional ownership and the extent of income smoothing. Our results imply that institutional owners may play a different role in monitoring income smoothing during the recessionary period in Japan from the normal economic periods studied in most prior studies.

Sign in / Sign up

Export Citation Format

Share Document