Discretionary Accruals in Italian Private Firms and Non-Linear Bank Loan Granting

2017 ◽  
pp. 83-99
Author(s):  
Elisabetta Mafrolla ◽  
Viola Nobili
Keyword(s):  
Financial Reporting ◽  
Banking System ◽  
Regulatory System ◽  
Discretionary Accruals ◽  
Bank Loans ◽  
Bank Loan ◽  
Banking Union ◽  
Private Firms ◽  
European Banking Union

This paper investigates whether and at what extent private firms reduce the quality of their accruals in order to signal a better portrait to the bank and obtain new or larger bank loans. We measure earnings discretionary accruals of a sample of Italian private firms, testing whether new and larger bank loans are associated with a higher (lower) quality of earnings in borrowers' financial reporting. We study bank loan levels and changes and how they impact discretionary accruals and found that, surprisingly, private firms' discretionary accruals are systematically positively affected by an increase in bank loans, although they are negatively affected by the credit worthiness rating assigned to the borrowers. We find that the monitoring role of the banking system with regard to the adoption of discretionary accruals is effective only when the loan is very large. This paper may have implications for policy-makers as it contributes to the understanding of the shortcomings of the banking regulatory system. This is an extremely relevant issue since the excessive amount of non-performing loans held by Italian banks recently threatened the stability of the European Banking Union as a whole.

scholarly journals Contracting debt and the quality of financial reporting in private firms

2018 ◽  
Vol 63 (2) ◽  
pp. 37
Author(s):  
Inna Sousa Paiva
Keyword(s):  
Financial Performance ◽  
Financial Reporting ◽  
Strong Evidence ◽  
Reporting Quality ◽  
Discretionary Accruals ◽  
Financial Reporting Quality ◽  
Private Firms ◽  
Bank Debt ◽  
Using Data

<p class="Default"><span lang="EN-US">This study investigates whether the quality of firms’ financial reporting is influenced by the con­tracting of debt, using data on Portuguese private firms from 2013 to 2015. More specifically, the study uses earnings smoothing, magnitude of absolute discretionary accruals, and timeliness of disclosure as proxies for financial reporting quality. I find that private firms which contract more debt exhibit higher levels of financial reporting quality. Additionally, firms that contract larger amounts of debt and with a good financial performance tend to exhibit lower quality financial reporting. The results provide strong evidence that private firms have an interest in camouflaging their performance in the presence of higher levels of bank debt. </span></p>

Bank Loans with Chinese Characteristics: Some Evidence on Inside Debt in a State-Controlled Banking System

2011 ◽  
Vol 46 (6) ◽  
pp. 1795-1830 ◽  
Author(s):  
Warren Bailey ◽  
Wei Huang ◽  
Zhishu Yang
Keyword(s):  
Banking System ◽  
Bank Loans ◽  
Bank Loan ◽  
Inside Information ◽  
Inside Debt ◽  
Social Instability ◽  
Chinese Characteristics ◽  
Loan Approval ◽  
Loan Announcements ◽  
Local Stock

AbstractWe study a transitional economy where state-controlled banks make loan decisions based on noisy inside information on prospective borrowers, and may lend to avert unemployment and social instability. In China, poor financial performance and high managerial expenses increase the likelihood of obtaining a bank loan, and bank loan approval predicts poor subsequent borrower performance. Negative event study responses occur at bank loan announcements, particularly for borrowers measuring poorly on quality and creditworthiness, or for lenders or borrowers involved in litigation regarding loans. Our results highlight dilemmas in a state-led financial system and the local stock market’s sophistication in interpreting news.

Spillover effect of regulatory accounting inspections on accounting quality of peer companies

2020 ◽  
Vol 35 (5) ◽  
pp. 685-704
Author(s):  
Eunjung Cho ◽  
Jeehong Kim ◽  
Sooin Kim
Keyword(s):  
Financial Reporting ◽  
Spillover Effect ◽  
Discretionary Accruals ◽  
Least Square ◽  
Disciplinary Action ◽  
Future Research ◽  
Accounting Quality ◽  
Content Type ◽  
Negative Results

Purpose The purpose of this paper is to examine whether a negative outcome (i.e. a sanction) of an inspection by Korea’s Financial Supervisory Service for an industry-leading company affects the accounting quality of other companies in the same industry. The premise is that when peer companies observe the negative results of such an inspection on a leader in their industry, they will be more concerned about their own risk during a future inspection and more likely to increase their accounting quality. Design/methodology/approach The authors conduct a mutivariate Oridnary Least Squares (OLS) regression using 11,476 South Korean samples from 2002 to 2016. The study uses ordinary least square regressions to test the hypotheses using discretionary accruals as a proxy for accounting quality. Findings The authors find that peer companies reduced their discretionary accruals in the next period and that this reduction is amplified according to the severity of the disciplinary action on the industry leader and the materiality of errors in that leader’s financial statements. Originality/value This finding contributes to the literature by providing the first evidence of a spillover effect of regulatory inspection on accounting quality that financial reporting sanctions not only affect the overall accounting quality of the sanctioned company but also that of its peers in the same industry. The authors expect this study to lead to future research on the effect of other regulations on industry-wide accounting quality.

scholarly journals Is Earnings Quality Associated with Corporate Social Responsibility? Evidence from the Korean Market

2019 ◽  
Vol 11 (15) ◽  
pp. 4116 ◽  
Author(s):  
Yoon ◽  
Kim ◽  
Lee
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Large Family ◽  
Discretionary Accruals ◽  
Sample Analysis ◽  
Socially Responsible ◽  
Weak Support ◽  
Environmentally Sensitive ◽  
Korean Market

Socially responsible firms are believed to behave in a responsible manner to restrict earnings management and thus deliver more reliable and transparent financial information to investors. We test this hypothesis by predicting a higher quality of financial reporting for socially responsible firms in the Korean market. The entire sample analysis provides evidence for the hypothesis in the use of discretionary accruals as proxy variables for the quality of financial reporting. However, our sub-sample analysis indicates that such weak support is driven by a group of environmentally sensitive firms and the affiliates of large family-owned conglomerates, or chaebol. Socially responsible firms are less likely to be involved with earnings management in the group of non-environmentally sensitive industries and non-chaebol affiliates. These firms provide a better quality of financial reporting in terms of both the use of discretionary accruals and real activity manipulations. In line with recent studies, our findings suggest that ethical concerns in producing high-quality financial reports rely significantly on firm characteristics.

scholarly journals The Effects of Financial Reporting on Bank Loan Contracting in Global Markets: Evidence from Mandatory IFRS Adoption

2015 ◽  
Vol 14 (2) ◽  
pp. 45-81 ◽  
Author(s):  
Tai-Yuan Chen ◽  
Chen-Lung Chin ◽  
Shiheng Wang ◽  
Wei-Ren Yao
Keyword(s):  
Interest Rates ◽  
Financial Reporting ◽  
Bank Loans ◽  
Bank Loan ◽  
Accounting Quality ◽  
Firm Level ◽  
Financial Reporting Standards ◽  
Ifrs Adoption ◽  
Loan Contracting ◽  
The 2008 Financial Crisis

ABSTRACT This study examines the effects of the mandatory adoption of International Financial Reporting Standards (IFRS) on the contract terms of bank loans in a global setting. Using a difference-in-differences design based on 26,474 bank loans in 31 countries during the 2000–2011 period, we find that borrowers who mandatorily adopt IFRS experience an increase in interest rates, a reduction in the use of accounting-based financial covenants, an increase in the likelihood that a loan is collateralized, a reduction in loan maturity, and an increase in the fraction of a loan retained by lead arrangers. These findings are robust to the removal of the 2008 financial crisis from our analysis, as well as to the matching of IFRS and non-IFRS borrowers on various country- and firm-level characteristics. Furthermore, we find that these changes are more pronounced for borrowers with greater financial reporting changes, as well as those with poorer accounting quality after IFRS adoption. JEL Classifications: G15; G21; F34; M41.

Justice system and corruption dog Bulgaria’s euro bid

2019 ◽  
Keyword(s):  
Banking System ◽  
Political Support ◽  
Banking Union ◽  
Waiting Room ◽  
Content Type ◽  
Eu Member States ◽  
European Banking Union ◽  
Finance Minister ◽  
European Banking ◽  
The Stability

Significance Bulgaria must also join the European Banking Union (EBU) as part of its Exchange Rate Mechanism (ERM) II bid, in order to alleviate concerns over institutional governance, economic convergence and the stability of its banking system. ERM II accession -- the ‘waiting room to the euro’ -- would bolster Bulgaria’s financial and monetary stability, and help serve as a policy anchor; Bulgaria had hoped to join this month, but Finance Minister Vladislav Goranov said in June he now hoped for entry by year-end if not before. Impacts Timing will depend on Bulgaria’s meeting the new requirement to join both ERM II and the EBU at the same time. Political support from other euro-area states could also affect the ultimate timeline. That Croatia has just applied for ERM II shows adopting the euro is still a goal, particularly for smaller EU member states.

Effect of eliminating mandatory reconciliation requirements for foreign issuers in the U.S.

2019 ◽  
Vol 17 (2) ◽  
pp. 271-291
Author(s):  
Gaurav Kumar ◽  
Jagjit S. Saini
Keyword(s):  
Financial Reporting ◽  
Value Relevance ◽  
Accounting Standards ◽  
Discretionary Accruals ◽  
Accrual Quality ◽  
Content Type ◽  
The Usa ◽  
Reported Earnings ◽  
Book Values

Purpose The purpose of this paper is to examine the effect of choice of accounting standards on the value relevance and accrual quality of reported earnings and book values under International Financial Reporting Standards (IFRS) versus US Generally Accepted Accounting Principles (GAAP). Design/methodology/approach The authors examine the effect of choice of accounting standards on the value relevance and accrual quality of reported earnings and book values under IFRS versus US GAAP using 404 firms from 37 countries listed in the USA. They use the modified Jones (1991) model to measure accruals. Findings The authors find that value relevance of the book value of equity is increasing (significantly) when the sample firms use IFRS to prepare their financial statements. They also find some evidence in support of the mediating effect of the choice of accounting standards on the accrual quality of the sample firms. The results of this paper indicate that sample firms with lower accrual quality (larger discretionary accruals) experience higher returns during the fiscal year. However, the authors also find that the positive association between size of discretionary accruals and returns is decreasing in the use of IFRS by the sample firms. Originality/value This paper adds to prior literature on the harmonization of accounting standards and emphasizes the role of accounting standards in the quality of financial reporting. By using the financial data of all foreign registrants listed in the USA, the authors are able to provide deeper and more representative evidence.

Influence of Macroeconomic Factors in Failure of Return of Bank Loans in Kosovo

2018 ◽  
Vol 9 (5) ◽  
pp. 97-106
Author(s):  
Nagip Skenderi ◽  
Adem Dreshaj
Keyword(s):  
Sustainable Development ◽  
Banking System ◽  
Bank Loans ◽  
Bank Loan ◽  
Crucial Issue ◽  
Macroeconomic Factors ◽  
Grace Period ◽  
Independent Variables ◽  
Maturity Period ◽  
Banking Business

Abstract The risk from non-payment of loans is a challenge for all the banks. Payment of the loans is a crucial issue for efficient functioning of the banking system. Loaning is one of the main uncertainties in the banking business, for loan payment can be rarely guaranteed completely. Often, a question occurs: what are the factors that influence in failure of the return of bank loan? What are the politics that must be followed to stimulate the return of bank loans? Through this research we aim to highlight the reasons of debtors in failing of loan return by studying the link of macroeconomic factors with NPL (non-performing loans). This is a first research in Kosovo that analyses the link of the macroeconomic factors influence (GDP, interest norms, unemployment, inflation, maturity period and grace period) these referred in the research as “independent variables” in failure of bank loan return that in the study bellow are referred as “dependent variable NPL for the Kosovo bank sector. This study argues as what is needed for the Kosovo banking system and presents the ideas of sustainable development of banking system in correspondence with non-performing loans, acknowledgment of the factors that hinder the return of the bank loans and reorientation of the loaning politics.

XBRL Adoption and Bank Loan Contracting: Early Evidence

2017 ◽  
Vol 32 (2) ◽  
pp. 47-69 ◽  
Author(s):  
Gary Chen ◽  
Jeong-Bon Kim ◽  
Jee-Hae Lim ◽  
Jie Zhou
Keyword(s):  
Financial Reporting ◽  
Lower Cost ◽  
Bank Loans ◽  
Bank Loan ◽  
Difference In Differences ◽  
Business Reporting ◽  
Loan Contracting ◽  
Research Designs ◽  
Alternative Research ◽  
Loan Spreads

ABSTRACT We examine how the adoption of the eXtensible Business Reporting Language (XBRL) for financial reporting impacts the pricing of bank loans. Using a sample of loans granted to U.S. borrowers from 2007–2013, we find that the adoption of XBRL is associated with a reduction in loan spreads. We further find that the reduction in loan spreads is greater for borrowers who have information that is inherently costlier to process. Results from a difference-in-differences specification along with other alternative research designs provide similar inferences. Subsequent to XBRL adoption, we further show that loan spreads are lower for firms that use more standardized XBRL tags and greater for those that use more extension elements. Overall, our results are consistent with the view that the XBRL mandate brings about an environment that enables lenders to gather and process information in a timelier manner and at a lower cost. JEL Classifications: M41; K22.

Sign in / Sign up

Export Citation Format

Share Document