scholarly journals Banks’ risk and the impact of audit quality on income smoothing

2021 ◽  
Vol 20 (3) ◽  
pp. 425-453
Author(s):  
Konstantinos Vasilakopoulos ◽  
◽  
Christos Tzovas ◽  
Apostolos Ballas
Keyword(s):  
European Union ◽  
Banking Sector ◽  
Audit Quality ◽  
Ordinary Least Squares ◽  
Income Smoothing ◽  
Fiscal Year ◽  
Loan Loss ◽  
Industry Specialization ◽  
Quality Dimensions ◽  
The Impact

Research question: This paper investigates the impact that specific audit quality dimensions have upon European Union Banks’ income smoothing behavior. Motivation: Although previous studies have investigated the characteristics of audit quality, little is known about the audit quality in the banking sector. Excessive risk taking and business complexity may further impair auditors’ work and an audit’s outcome may be conditioned upon banks’ risk. Idea: We examine whether auditors’ independence influences bank managers’ decision to smooth income and whether this attribute depends on bank risk and systemic importance. We investigate the association between auditors’ industry specialization and auditors’ tenure with the level of Loan Loss Provisions Data: We use a sample of 133 banks from 26 European Union countries for the period 2006-2013. Tools: Similar to previous research, we use ordinary least squares analysis to test the results. Findings: Empirical findings provide evidence that the auditors’ industry expertise limits management’s discretion of high-risk banks to a greater extent relative to low risk banks. In contrast, our results imply that banks that retain the same auditor for a consecutive fiscal year are more likely to engage in income smoothing through LLPs. Furthermore, our study examines whether audit quality dimensions have different outcomes on income smoothing decisions between globally systemically important banks (GSIBs) and the rest of banks. Our results provide evidence that the impact of industry specialization and auditor tenure on EU banks accounting policy decisions differs between GSIBs and non-GSIBs. Contribution: Our analysis contributes in the existing body of research by focusing on the impact of audit quality on managements’ accounting discretion and the influence of banks’ special attributes on the audit process.

The impact of corporate governance mechanisms on EU banks’ income smoothing behavior

2018 ◽  
Vol 18 (5) ◽  
pp. 931-953 ◽  
Author(s):  
Konstantinos Vasilakopoulos ◽  
Christos Tzovas ◽  
Apostolos Ballas
Keyword(s):  
European Union ◽  
Corporate Governance ◽  
Ordinary Least Squares ◽  
Income Smoothing ◽  
Green Paper ◽  
Governance Mechanisms ◽  
Loan Loss ◽  
Content Type ◽  
Corporate Governance Mechanisms ◽  
The Impact

PurposeThis paper aims to investigate the impact that governance mechanisms have on European Union ‘banks income smoothing behavior.Design methodology/approachThe authors examine the impact that corporate governance mechanisms included in European Commissions’ proposals regarding the improvement of corporate governance mechanisms (Green Paper) have upon European Union banks’ accounting policy decisions regarding the level of loan loss provisions (LLPs). In addition, the authors examine whether banks’ capital structure operates as an effective internal corporate governance practice. The authors investigate the association between certain corporate governance characteristics and the level of LLPs for a sample of 98 banks from 23 European Union countries for the period of 2010-2013, in the aftermath of the 2008 financial crisis. To test the hypotheses, a multivariate regression model is run. Similar to previous research, the authors use ordinary least squares analysis to test the results.FindingsEmpirical findings provide evidence that there is a positive association between LLPs and accounting income, implying the existence of an income-smoothing pattern of provisions. In addition, the results suggest that banks managers’ decision to smooth income may differ with regard to the board structure, the level of leverage and the provision of disclosure for remuneration for chief executive officer.Originality/valueThe findings of this study contribute to the existing literature concerning banks’ income smoothing behavior. These findings can be useful to regulators, as the authors provide some evidence regarding the effectiveness of the European Union corporate governance framework.

scholarly journals Government Ability, Bank-Specific Factors and Profitability - An insight from banking sector of Vietnam

2020 ◽  
Author(s):  
V.C. Nguyen ◽  
Thu Thuy Nguyen ◽  
Huu Tinh Nguyen
Keyword(s):  
Banking Sector ◽  
Stock Exchange ◽  
Panel Data Analysis ◽  
Banking System ◽  
Ordinary Least Squares ◽  
Loan Loss ◽  
Bank Efficiency ◽  
Specific Factors ◽  
The Impact ◽  
Bank Specific Factors

To the best of our knowledge, a very few studies have focused on the effects of government ability on bank performance in developing and emerging countries. The aim of this work is to study the impact of government ability, bank-specific factors on profitability in the banking system in Vietnam. Using a panel data analysis in the period over 2014-2018, the study analyzes based on the methods of fixed, random effects, and pooled ordinary least squares. Data were collected from Vietnam’s Stock Exchange, General Statistics Office, and Worldwide Governance Indicators. Our results demonstrate that government ability has negatively affected bank efficiency while economic growth will not affect bank efficiency. In addition, the prime bank-specific factors that can significantly impact on bank efficiency are non-performing loan, loan-to-deposit ratio, loan loss reserves. A bank with a higher loan-to-deposit ratio can positively impact on the probability of a bank. In contrast to the risk, a bank with a greater risk as well as a higher level in non-performing loan in operation will negatively impact on its efficiency.

Impact of firm’s specific factors on audit fee of quoted consumer goods firms

2020 ◽  
Vol 4 (1) ◽  
pp. 47-55
Author(s):  
Wasiu Ajani Musa ◽  
Ramat Titilayo Salman ◽  
Ibrahim Olayiwola Amoo ◽  
Muhammed Lawal Subair
Keyword(s):  
Consumer Goods ◽  
Audit Quality ◽  
Audit Fees ◽  
Ordinary Least Squares ◽  
P Value ◽  
Chi Square ◽  
Ifrs Adoption ◽  
Audit Fee ◽  
Specific Factors ◽  
The Impact

Greater pricing presume on audit service has been put by the regulations of the auditing and accounting practices for the disclosure of audit fees, since audit fee is directly related to audit quality. However, the audit fees perceived by the client is often different from the amount charged by the auditors. Hence, this study investigated the impact of firm-specific characteristics on audit fees of quoted consumer goods firms in Nigeria using a purposive sampling technique. Secondary data were obtained from annual reports of the companies for the period from 2009-2016. The empirical result from Breusch-Pagan Lagrange Multiplier Test (BP-LM) produced a chi-square value of 13.94 with p-value of 0.0001 indicating that pooled ordinary least squares (OLS) will not be appropriate for the study. The Hausman test showed a chi-square of 23.55 with a p-value of 0.001 indicating that the null hypothesis is strongly rejected. Thus, the only estimate from the fixed effect model was interpreted to explain the relationship between firm-specific characteristics and audit fees of quoted consumer goods firms in Nigeria. The result revealed that auditee size, auditee risk, auditee profitability and IFRS adoption are the firm specific characteristics that impact on audit fees with only auditee size and IFRS adoption being positively related to audit fees while the other factors are negatively related to audit fees. Based on this finding, this study concluded that the firm’s specific factors are the major drivers of audit fees in Nigeria consumer goods firms. This study recommends among others that companies should implement corporate governance principles that address issues relating to board independence and committee sizes to guide activities in the consumer goods sector since profitability behave negatively with audit fees.

Earnings management and audit quality at Damascus securities exchange: Does managerial ownership matter?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Zukaa Mardnly ◽  
Zinab Badran ◽  
Sulaiman Mouselli
Keyword(s):  
Earnings Management ◽  
Ownership Structure ◽  
Management Practices ◽  
Audit Quality ◽  
Emerging Market ◽  
Ordinary Least Squares ◽  
Managerial Ownership ◽  
External Audit ◽  
Content Type ◽  
The Impact

Purpose The purpose of this study is to examine the individual and combined effect of managerial ownership and external audit quality, as two control mechanisms, on earnings management. Design/methodology/approach This study applies ordinary least squares estimates on fixed-time effects panel regression model to test the impact of the investigated variables on earnings management for the whole population of banks and insurance companies listed at Damascus Securities Exchange (DSE) during the period from 2011 to 2018. Findings The empirical evidence suggests a negative non-linear relationship between managerial ownership (as proxied by board of directors’ ownership) on earnings management. However, neither audit quality nor the simultaneous effect of the managerial ownership and audit quality (Big 4) affects earnings management. Research limitations/implications DSE is dominated by the financial sector and the number of observations is constrained by the recent establishment of DSE and the small number of firms listed at DSE. In addition, the non-availability of data on executive directors’ and foreign ownerships restrict our ability to uncover the impact of different dimensions of ownership structure on earnings management. Practical implications First, it stimulates investors to purchase stocks in financial firms that enjoy both high managerial ownership, as they seem enjoying higher earnings quality. Second, the findings encourage external auditors to consider the ownership structure when choosing their clients as the financial statements’ quality is affected by this structure. Third, researchers may need to consider the role of managerial ownership when analyzing the determinants of earnings management. Originality/value It fills the gap in the literature, as it investigates the impact of both managerial ownership and audit quality on earnings management in a special conflict context and in an unexplored emerging market of DSE. It suggests that managerial ownership exerts a significant role in controlling earnings management practices when loose regulatory environment combines conflict conditions. However, external audit quality fails to counter earnings management practices when conditions are fierce.

scholarly journals Determinants of Credit Risk in the Banking Sector of Ghana: A Panel Co-integration Approach

2020 ◽  
Vol 5 (4) ◽  
Author(s):  
Thomas Appiah ◽  
Frank Bisiw
Keyword(s):  
Credit Risk ◽  
Least Squares ◽  
Banking Sector ◽  
Ordinary Least Squares ◽  
Capital Adequacy ◽  
High Rate ◽  
Long Run ◽  
Integration Techniques ◽  
The Government ◽  
The Impact

The economic development of any nation hinges on the health of its financial system. In recent years, the health of the Ghanaian Banking sector has been affected severely as a result of high levels of non-performing loans (NPLs), which has been identified as a major threat to the overall profitability and survival of banks. To minimize the impact of NPLs on the financial sector, key stakeholders such as the government, bank officials and regulators are working hard in that regard. However, any policy response aimed at dealing with the high rate of non-performing loans first requires the understanding of the underlying determinants of NPLs. Against this backdrop, this paper apply panel co-integration techniques to investigate the determinants of credit risk (NPLs) in the banking sector of Ghana.  We use NPL as a proxy to measure credit risk and assess how it is influenced by macroeconomic and bank-specific factors. A balanced panel data of 16 universal banks in Ghana from 2010 to 2016 has been analyzed using Panel co-integration techniques such as Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS). Our result shows that growth in the economy, measured by Gross Domestic Product (GDP) has significant influence on the NPLs of banks in the long-run. The results further revealed that capital adequacy, profitability and liquidity of banks are significant predictors of NPLs. However, our results suggest that bank size, inflation and interest rate have statistically insignificant influence on the NPLs of Ghanaian banks. The study recommend, among others, that whereas it is important for government and policymakers to work to improve macroeconomic outcomes, banks should also improve their capital adequacy, profitability, and efficiency position as these bank-specific interventions could significantly improve credit quality and minimize NPLs.

The effect of the financial crisis on audit quality: European evidence

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Maria I. Kyriakou
Keyword(s):  
Financial Crisis ◽  
Audit Quality ◽  
Ordinary Least Squares ◽  
Least Squares Regression ◽  
Cross Sectional ◽  
Accounting Firms ◽  
Content Type ◽  
Financial Firms ◽  
The Impact ◽  
Big Four

Purpose This paper aims to examine the impact of the recent financial crisis on audit quality by analysing discretionary accruals. Design/methodology/approach This study considers a sample of German, French, Italian and Spanish non-financial firms from 2005 to 2013 to investigate the auditor’s independence. It uses a cross-sectional and time-series ordinary least squares regression model to control for other predictors of the auditor’s independence when the financial crisis produces a decrease in audit quality. Findings The proportion of the non-financial firms having lower audit quality was higher during the financial crisis. In addition, during the crisis auditors were less likely to provide a higher audit quality for these non-financial firms. The level of audit quality returned to normal levels during the post-crisis years when the crisis had ceased. Originality/value These findings contribute to the literature on the impact of economic and financial changes on audit quality. In addition, this research finds that the Big Four accounting firms provide a higher audit quality in different circumstances from non-Big Four accounting firms, and that audit quality decreased during the crisis and returned to normal in the post-crisis period.

scholarly journals Effects of Service Quality on Customer Satisfaction in Nepalese Commercial Banks

2018 ◽  
Vol 24 (1-2) ◽  
pp. 1-16
Author(s):  
Achyut Gnawali
Keyword(s):  
Customer Satisfaction ◽  
Service Quality ◽  
Banking Sector ◽  
Joint Venture ◽  
Commercial Banking ◽  
Secondary Sources ◽  
Quality Dimensions ◽  
Service Quality Dimensions ◽  
Customer Attitudes ◽  
The Impact

 Service Quality and customer satisfaction have long been recognized as playing a crucial role for success and survival in today's competitive market. This study has tried to discover the impact of service quality on customer satisfaction in Nepalese commercial bank. A structured questionnaire with 5 point Likert scale has been used to collect the data by conducting survey. The sample size is 392 and is chosen on a convenient basis. Data has been analyzed by using SPSS software (version: 22).Both primary and secondary sources of data are collected and used. Result of the study shows that tangibility, reliability, responsiveness, assurance and empathy significantly and positively influence customer attitudes in terms of satisfaction, i.e. service quality dimensions are crucial for customer satisfaction in public, private and joint venture commercial banking sector in Nepal.The Journal of Development and Administrative Studies (JODAS) Vol. 24 (1-2), pp. 1-16

scholarly journals The Impact of the European Integration Process on the Banking System – an Overview

2010 ◽  
Author(s):  
Bogdan Ilut
Keyword(s):  
European Union ◽  
European Integration ◽  
Banking Sector ◽  
Banking System ◽  
Main Channel ◽  
The European Union ◽  
Integration Process ◽  
Fully Integrated ◽  
Is Integration ◽  
The Impact

<p>In the last decade the European integration process was the main focuses of the European Union, as its completion could bring a huge step toward a fully integrated European Union. As the banking sector is the main channel for funding of the European economy, it has become now more clearly than ever that is integration is of the up more essence. The aim of this paper is to quantify the progresses registered by the main European Union’s economies in the process of banking integration, as their example is generally followed by the other member states. First we underline the necessity of the European integration and the progress made using an extended literature review doublet by an analysis of the main indicators for the banking systems of these countries. We also present, in a non-exhaustive way, the main trends that have characterised the banking sectors of these countries in the last decade: diversification, vertical product differential and consolidation underlying their impact on the sectors architecture.</p>

Does Country Risk Affect Banking Efficiency: Empirical Evidence from Turkey and Selected Countries from the European Union

2020 ◽  
pp. 097215092093397
Author(s):  
Anwar Al-Gasaymeh ◽  
Miral R. Samarah
Keyword(s):  
European Union ◽  
Banking Sector ◽  
Stochastic Frontier Analysis ◽  
Generalized Method Of Moments ◽  
Country Risk ◽  
The European Union ◽  
Banking Efficiency ◽  
Frontier Analysis ◽  
The Impact ◽  
The Eu

This study explores the readiness of the Turkish banking sector for its accession to the European Union (EU). Obviously, the job is not finished yet, with the challenges of introducing country risk variables and their impact on banking efficiency. Although efficiency analysis remains an important issue in economic studies to answer whether the Turkish banking sector is ready for the accession to the EU. Therefore, this study aims to investigate the impact of country risk levels on banking efficiency in Turkey and the EU in recent years, using stochastic frontier analysis for a parametric technique for the period 2010–2018. In the second stage, efficiency measures are used to investigate the effect of country risk and macroeconomic variables, applying the generalized method of moments. The results suggest that the banking sector operating in a country with low risk tends to perform more efficiently.

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