PRUDENTIAL REGULATORY REGIMES, ACCOUNTING STANDARDS, AND EARNINGS MANAGEMENT IN THE BANKING INDUSTRY

Authors

Ali Ashraf, Frostburg State University, USAFollow
M. Kabir Hassan, University of New Orleans, USAFollow
Kyle J. Putnam, Linfield College, USAFollow
Arja Turunen-Red, University of New Orleans, USAFollow

Document Type

Article

Abstract

We analyze if a change in accounting standard or a change in prudential regulationimpacts banks’ loan loss provision. We find that, in general, the banks using aprinciples-based accounting standard exhibit a lower level of earnings managementcompared to banks using a rules-based accounting standard. When a country movesfrom pro-cyclical macro-prudential regulations to a dynamic provisioning regime,banks are more likely to set aside a larger amount of loan loss provision for the purposeof income smoothing.

Recommended Citation

Ashraf, Ali; Hassan, M. Kabir; Putnam, Kyle J.; and Turunen-Red, Arja (2019) "PRUDENTIAL REGULATORY REGIMES, ACCOUNTING STANDARDS, AND EARNINGS MANAGEMENT IN THE BANKING INDUSTRY," Bulletin of Monetary Economics and Banking: Vol. 21: No. 3, Article 3.
DOI: https://doi.org/10.21098/bemp.v21i3.975
Available at: https://bulletin.bmeb-bi.org/bmeb/vol21/iss3/3

First Page

367

Last Page

394

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Country

USA

Affiliation

Frostburg State University