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This study aims to investigate the influence of macroeconomic variables and bank-specific factors on the credit risk of Islamic banking in Pakistan, through the panel data regression tools. The statistical tool which is applied to the research is ordinary least square (OLS) regression model. All the assumption to be fulfilled before using OLS. The secondary data have been taken from four (04) full-fledged Islamic banks in Pakistan, from 2007 to 2021. The focus of the research is to find the impact of macroeconomic variables like Gross domestic product, inflation, and growth in the interest rate and bank-specific factors like size, return on assets, loan loss provision, capital Adequacy ratio, and Asset quality to determine the credit risk (non-performing loans) of Islamic banks in Pakistan. The result of the ordinary least square (OLS) regression model is that loan loss provisions (LLP) have a positive and significant impact on credit risk (CR) and size of bank (S), and Capital adequacy ratio (CAR) have a negative and significant impact on credit risk (CR) of Islamic Bank of Pakistan. Inflation (INF) and Gross domestic product (GDP) have a positive and insignificant impact on credit risk (CR), and growth in interest rate (INT), return on assets (ROA), and asset quality (AQ) has a negative and insignificant impact on Credit risk (CR) of Islamic Bank of Pakistan. Therefore, Islamic banks should carefully examine their specific factors, i.e. LLP, S, and CAR to manage their credit risk, particularly in monitoring loans. [ABSTRACT FROM AUTHOR]

Purpose: This research aims to analyze whether credit unions manage their accounting results in order to smooth them through the provision for doubtful accounts (income smoothing), from a default perspective. Methodology: The sample reaches 938 unique cooperatives considering the period from December 2010 to December 2018, with data from the Central Bank of Brazil, tested using the multiple regression statistical technique, in quarterly panels. Results: The variation in the stock of credit operations and the adjusted net income were not statistically significant in the model, however it was not possible to accept the hypothesis that credit unions use the allowance for loan losses (PCLD) as a mechanism for managing results. The interest rate implicit in the result of income from credit operations was significant, and therefore related to the PCLD variation, while the condition of free admission did not show statistical significance. The variation in default was significant in the model, with a negative coefficient, implying consistency with the earnings management hypothesis, since in a scenario of higher default (risk) the relationship is negative and, therefore, PCLD levels are lower, avoiding potential negative results. Contributions of the Study: The results indicate the absence of earnings management by PCLD in the sample and period, contributing to the discussion of the relationships between earnings management variables. This enables credit unions to reflect on their internal corporate governance structure. In addition, the evidence contributes to the progress of the literature on earnings manipulation in credit unions, for which there are few studies available and play an important role in the Brazilian market, ensuring funding flows to economic sectors not served by traditional banking institutions. [ABSTRACT FROM AUTHOR]

Purpose - This study examines the impact of competition and concentration on bank income smoothing in Central and Eastern European (CEE) countries. Design/methodology/approach - The two-step system GMM method was used to analyse the impact of competition and concentration on bank income smoothing in 17 CEEs from 2004 to 2015. Findings - Loan loss provisions (LLPs) are negatively related to bank competition and concentration. The authors find no evidence for income smoothing using LLPs in a high-competition or high-concentration environment. Research limitations/implications - A limitation of the study is that the analysis was restricted to commercial banks. The authors did not examine investment banks or microfinance banks in this study. Also, not having access to databases does not allow them to include recent years in the study. Practical implications - CEE commercial banks will likely keep fewer provisions or engage in underprovisioning when they face intense competition, and this can expose them to credit risk, which may threaten their stability. Originality/value - This study is the first to investigate the effect of concentration and competition on income smoothing among CEE banks. [ABSTRACT FROM AUTHOR]

Pakistan has limited trade with Central Asian Republics (CARs). Facing with stagnant exports and widening trade gap, CARs offer a great opportunity to Pakistan to diversify and expand its trade. The study analyzed the existing trade profile of Pakistan generally and with Central Asian states particularly. Additionally, the potentials for trade with CARs were also explored. The analysis suggests that trade with the CARs has not been encouraging as trade volume with these countries is nominal as total exports to CARs rose from US$ 40.4 M in 2016 to US$109 M in 202. Similarly imports also grew at nominal rate from US$ 28.0 M IN 2016 to US$ 59.1 M in 2021. Great trade potential exists for trade with Central Asian Countries. Pakistan has comparative advantage in different products like cotton and cotton products, pharmaceuticals, sports items, surgical items, cement, sugar, IT and telecommunication etc. and can export cheaper goods to the Central Asian states. Moreover, Central Asian Republics are rich in natural resources and Pakistan can import a number of products to meet local needs and accelerate economic development. However, Pakistan’s trade with the CARs has been facing upheavals, mainly due to continuous insecurity in Afghanistan, money exchange issues, banking and transaction problems, tariff issues and absence of direct flights. It is recommended that trad with Central Asian states shall be improved through transit and free trade agreements. Moreover, rationalization of tariff and provision of banking facilities in CARs, trade exhibitions, simplification of processes, tourism and cultural and educational exchange programs facilitated by direct flights and easy visa processes can help boost mutual trade. Construction of road and railways infrastructure in Afghanistan and extension of CPEC project to Afghanistan will connect Afghanistan and CARs to Pakistan which will reduce time and cost of transportation and hence will improve trade among Pakistan, Afghanistan and Central Asian Republics. [ABSTRACT FROM AUTHOR]

Over the last two decades, the regulators of the financial services sector in Saudi Arabia have aimed to develop a level of fair competition in the provision of banking services across the country. This paper utilizes non-structural approaches, the H-statistic developed by, and the Granger causality test. The second approach involves determining the Granger-based causal relationship between banks' cost efficiency and competition via data envelope analysis (DEA) using the generalized method of moments (GMM) panel. The study's data were drawn from 11 traditional banks in Saudi Arabia, covering the period from 2015 to 2021 (yearly data). The results of the non-structural approach, i.e., the H-statistic, demonstrate that the average fund rate had a positive effect on competition; however, the physical capital price index, the index of leverage, and the credit risk negatively affect the total revenue. Furthermore, a positive H-statistic value reflects the positive causality between competition and cost efficiency (higher efficiency results in a higher level of competition). The DEA results indicate that competition in the year 2021 was influenced by the competition level of the previous year (2020); moreover, the relationship between the previous year's cost efficiency Granger value, the greater availability, and the lower prices of banking products had a significant influence on the competition in the years under consideration (since a positive significant result from the test is available), which reflects the higher level of market structure and the greater availability and lower prices of banking products. Cost efficiency in the year 2021 was also positively influenced by the cost efficiency level of the previous year (2020), with competition forcing efficiency via the cutting of costs. [ABSTRACT FROM AUTHOR]

This paper examines the feasibility of transitioning to a new model of profit taxation for commercial banks in Georgia. The analysis is based on financial data from Georgian and European banks and compares effective tax rates, provisioning practices, and other relevant indicators. The study recommends strengthening horizontal monitoring between banks and tax authorities as an alternative to adopting the Estonian model of profit tax in Georgia. [ABSTRACT FROM AUTHOR]

The main objective of this study was to evaluate and compare the financial performance of commercial banks in Ethiopia during the implementation of growth and transformation plan II. Moreover, determinants of financial performance were examined. The study was conducted using secondary data obtained from the National Bank of Ethiopia, and the official website of each commercial bank. Multiple panel regression and independent sample t tests were used to show the relationship and to compare the financial performance of commercial banks between the study periods. The ratio of non-interest expenses to total expense, log_net profit per employee, interest income to total income, and exchange rate were variables with a positive and significant effect on the financial performance of commercial banks, while log_total loans per branch and inflation affected negatively the financial performance measured by return on assets. Whereas, the ratio of debt to equity, log_net profit per employee, total liquid assets to total deposits, interest income to total income, and exchange rate have a positive and significant impact, while the ratio of loan loss provision to total loan, log_total loans per branch, and inflation negatively and significantly affected financial performance measured by ROE. The independent sample t test shows that except for the ratio of total loans to total deposits and total capital to total assets, the remaining variables did not show significant differences between state and publicly owned banks. [ABSTRACT FROM AUTHOR]

Purpose: This study aims to investigate the effect of public corruption on the performance and risk of financial institutions domiciled in the USA.. Design/methodology/approach: This study uses the US Department of Justice's (DOJ) Public Integrity Section Reports to proxy corruption. The analysis is performed by bank size and includes robustness checks for omitted variables and endogeneity concerns. Findings: The results show that a corrupt environment is associated with lower bank performance without a reduction in risk. Larger banks tend to underestimate the increase in credit risk. Small- and medium-size banks seek to "re-capture" returns in corrupt districts by reducing their liquidity. Research limitations/implications: The implication of this research is that financial institutions do not thrive in corrupt environments and are unlikely to participate in corrupt practices. Overall, this study documents the tangible harm inflicted by corrupt practices. Practical implications: A practical implication is that banks may attempt to re-capture lower returns resulting from corrupt environments by extending more risky loans, specifically, commercial real estate loans. Social implications: This study demonstrates the costly impact of corruption on large and small banks. While larger banks report higher share of non-performing loans, smaller banks show an increase in the provision for loan and lease losses, suggesting that smaller banks may be more risk averse. Originality/value: Prior studies investigate corruption in US firms while excluding financial institutions. This study fills this gap by investigating the effect of public corruption on the performance and risk of financial institutions domiciled in the USA. [ABSTRACT FROM AUTHOR]

We use a large sample of US banks to construct a new indicator of managerial beliefs based on bank provisioning. This indicator does not only anticipate a future charge-off but also explains future loan growth and other variables. In particular, the indicator shows that an increase in managerial optimism (pessimism) leads to expanded (tight) lending, leverage, and a riskier (less risky) portfolio. Our findings confirm that widespread managerial optimism (pessimism) prevailed before (during) the 2007-2008 financial crisis and that changes in managerial beliefs played an important role in the lending and leverage cycles. [ABSTRACT FROM AUTHOR]

This article examines the implementation of AAOIFI Standard No. 35 by Saudi Islamic banks and the challenges they encounter. The research reveals that these banks do not adhere to the accounting standards set by AAOIFI, resulting in financial statements that do not accurately reflect their financial position. The reasons for this non-compliance are attributed to the Saudi Banking Law and the instructions of the Saudi Central Bank. The study suggests that regulatory authorities in Saudi Arabia should take steps to amend laws and instructions related to Islamic banks and enforce compliance with AAOIFI accounting standards. [Extracted from the article]

We model the evolution of stylised bank loan portfolios to assess the impact of IFRS 9 and US GAAP expected loss model (ECL) on the cyclicality of loan write-off losses, loan loss provisions (LLPs) and capital ratios of banks, relative to the incurred loss model of IAS 39. We focus on the interaction between the changes in LLPs charges (the flow channel) and stocks (the stock channel) under ECL. Our results show that, when GDP growth doesn't demonstrate high volatility, ECL model smooths the impact of credit losses on profits and capital resources, reducing the pro-cyclicality of capital and leverage ratios, especially under US GAAP. However, when GDP growth is highly volatile, the large differences in lifetime probabilities of defaults (PDs) between booms and busts cause sharp increases in LLPs in deep downturns, as seen for US banks during the COVID-19 crisis. Volatile GDP growth makes capital and leverage ratios more pro-cyclical, with sharper falls in both ratios in deep downturns under US GAAP, compared to IAS 39. IFRS 9 ECL demonstrates less sensitivity to lifetime PDs fluctuations due to the existence of loan stages, and hence can reduce the pro-cyclicality of capital and leverage ratios, even when GDP is highly volatile. [ABSTRACT FROM AUTHOR]

This paper traces the reaction of US banks to ROE underperformance on liquidity creation, equity capital, and loan loss provisions. We find that banks change their structures in the subsequent quarter after underperformance by increasing their on‐balance and off‐balance sheet liquidity creation to increase profitability. Banks tend to increase their equity capital and improve their loan quality by lowering non‐discretionary loan loss provisions to become safer. Banks signal their ability to overcome underperformance by increasing their discretionary loan loss provisions. Our results reveal that large banks rely mainly on off‐balance sheet liquidity creation as their primary tool to recover from underperformance while medium‐size and small banks adjust their equity capital to increase their safety. [ABSTRACT FROM AUTHOR]

Purpose: The study examines the impact of uncertainty on bank opacity while particularly taking into account the moderating role of market structures. Design/methodology/approach: Using a sample of Vietnamese banks from 2007 to 2019, the paper measures uncertainty at the disaggregate level of the banking sector through the dispersion of bank shocks and capture bank opacity from the perspective of bank earnings management based on discretionary loan loss provisions. The authors apply both structural and non-structural proxies of bank competition/concentration to better explore the role of market structures. Empirical regressions are conducted using the fixed effect regressions with Driscoll–Kraay standard errors and the two-step system generalized method of moments (GMM) technique, and then verified by the least squares dummy variable corrected (LSDVC) estimator. Findings: Bank earnings opacity is less severe in periods of higher uncertainty. Further analysis documents that the negative impact of uncertainty on bank earnings opacity is stronger when the level of bank competition increases or when bank market power decreases. Originality/value: The finding highlighting the conditioning role of market structures is entirely novel in the uncertainty-bank opacity literature. Moreover, in providing additional evidence on the significant impact of uncertainty on bank opacity, while prior related studies explore economic policy uncertainty, the authors utilize micro uncertainty in banking that exhibits enormous superiority. [ABSTRACT FROM AUTHOR]

Our aim is to compare empirically the profitability of European cooperative and commercial banks in a low interest rate environment. We employ dynamic panel data methods on a data set of nearly 1000 banks from 11 European countries where both ownership structures compete on the same market. We observed different banking strategies during the 2009–2015 period, when market interest rates reached an all‐time low. Our analysis produced four main conclusions. First, we find that commercial banks maintain superior profitability over cooperative banks in an environment of low interest rates. Second, commercial banks unjustifiably decreased their loan loss provisioning in a low interest rate environment in order to maintain their profitability. This trend is not present in cooperative banks. Third, decreased provisioning is present mainly in smaller institutions. Fourth, cooperative banks are significantly more stable than commercial banks in terms of their Z‐score in a low interest rate environment. This finding is in line with existing findings during normal interest rates. In addition, the Z‐score of cooperative banks increased during the observation period, whereas the Z‐score of commercial banks remained stable. Our findings survive a battery of robustness checks. Our results also show differences in the strategies and priorities of both competing ownership types in a low interest rate environment: commercial banks focus on maintaining their profitability by decreasing loan loss provisions, whereas cooperative banks seek to increase their stability. Therefore, regulators pursuing stability in a low interest rate environment should focus on the credit risk management of small commercial banks. [ABSTRACT FROM AUTHOR]

The article "Internally-Assessed Bank Capital Requirements and Loan Portfolio Spreads" by Danilo V. Mascia delves into how banks' use of risk-sensitive capital requirements impacts customer borrowing costs. The study reveals that banks employing internal rating-based models tend to have higher loan portfolio spreads due to factors like limited competition, funding options for borrowers, and political connections. Despite expectations, these banks do not fully pass on reduced capital requirements to customers, resulting in increased borrowing costs. The research contributes to understanding the effects of regulatory constraints on IRB models and their influence on bank performance. [Extracted from the article]

We examine the relationship between abnormal income from sales of available for sale (AFS) securities and bank external auditor fees. Prior research finds that income from sales of AFS securities is used to achieve financial and regulatory reporting objectives, helpful in predicting future bank income, and assigned a persistent valuation multiple by investors. Building on prior research that suggests real activities management leads to negative outcomes, we predict and find that auditors respond to abnormal income from AFS securities sales with increases in audit fees and the effect is stronger among high risk (i.e. higher stock return and earnings volatility) banks relative to low risk banks. In additional analyses concerning a bank's limited flexibility to achieve regulatory capital objectives through managing loan loss provisions, we find evidence of higher audit fees for banks with low regulatory capital and aggressive income-increasing AFS security sales. Among other robustness tests, we find higher audit fees as abnormal income from sales of AFS securities increases among banks with liquidity concerns and those approaching failure. Our findings suggest that auditors interpret abnormal income from AFS securities sales as an indicator of increased client business risk. [ABSTRACT FROM AUTHOR]

We assess the impact of adopting a transnational supervisor on the distance-to-distress and credit risk of large and complex banks, exploring the establishment of the Single Supervisory Mechanism (SSM) in 2014 as a quasi-natural experiment. Using a differences-in-differences approach, we compare SSM banks vis-à-vis banks with a similar size and complexity operating in European countries outside the SSM. Our results suggest that adopting a transnational supervisor increases the distance-to-distress, particularly for banks operating in countries with larger banking sectors, higher market concentration and greater supervisory discretion. We also show that SSM banks reduced loan loss reserves and NPLs significantly more than non-SSM banks, but only among the most capitalized banks – which is consistent with the notion that well-capitalized banks are better able to weather haircuts induced by credit risk reduction initiatives. Interestingly, we find that SSM banks from countries with greater supervisory discretion saw their NPLs increase in the first years of the SSM, which could reflect the elimination of national idiosyncrasies in credit risk accounting. In general, the evidence presented in our paper suggests that transnational supervision bears a superior ability to increase the distance-to-distress, reduce credit risk, and harmonize supervisory practices among large and complex banks. [ABSTRACT FROM AUTHOR]

We investigate whether banks use loan loss provisions to smooth income and whether this behaviour is influenced by foreign bank presence, ownership and institutional quality differences across African countries. We examine 370 banks from 21 African countries from 2002 to 2021. We find evidence that African banks use LLPs to smooth their income when they are more profitable during economic boom or recession. Income smoothing is persistent (i) among banks with a widely dispersed ownership, (ii) among banks with strong government ownership and (iii) among banks with weak government ownership. Income smoothing is also persistent in African countries that have greater corruption control, better regulatory quality and political stability. In contrast, moderate concentrated ownership reduces bank income smoothing. Bank income smoothing is also reduced in African countries that have strong rule of law, high government effectiveness, strong foreign bank presence and strong voice and accountability institutions. The implication is that effective corporate governance and institutional quality can constrain the extent of income smoothing by African banks. [ABSTRACT FROM AUTHOR]

We investigate whether, and to what extent, banks exploit their discretion over loan loss provisions to achieve their management purposes during the pandemic. Using a sample of US banks during the current COVID-19 outbreak, we find that banks are more eager to use discretionary loan loss provisions in response to the worsening pandemic situation. We find in particular that banks use discretionary loan loss provisions to manage regulatory capital, smooth income and signal private information to outsiders. Overall, this paper enriches the literature on bank discretionary behaviour during the difficult time, especially during the current COVID-19 pandemic, and therefore, it has important implications for banking supervisor and bank stakeholders. [ABSTRACT FROM AUTHOR]

Bank executives' substantial compensation is seen as one of the factors that contributed to the risk-taking that led to the 2008–2009 financial crisis. We test whether and how pay disparities between CEO and non-CEO executives—the so-called CEO pay gap—influences risk-taking at publicly traded commercial banks in the U.S. We find strong evidence that larger CEO pay gaps are associated with lower risk levels, improved financial performance, and greater information transparency. Our findings are unique to banks and are consistent with the CEO power proposition. We corroborate this proposition by linking larger pay gaps to increased CEO power and low CEO turnover-performance sensitivity. Our results imply that placing absolute limits on bank CEO pay would likely result in increased bank risk-taking. [ABSTRACT FROM AUTHOR]

Purpose: The "public interest" of financial institutions was used as an argument to intervene in accounting practices. The Bank of Spain's standard was not compatible with International Accounting Standard (henceforth IAS) 39 and the Spanish banking sector had become one of the most provisioned in Europe. This makes it an interesting case study of the relationship between provisioning and income smoothing. The 2008 financial crisis revealed that provisions were insufficient and a reinforcement regulation process began in 2012. This paper aims to examine whether, since 2012, the Bank of Spain's regulatory effort on impairment accounting standards has induced less income smoothing, correcting its countercyclical effect. Design/methodology/approach: A regression model is applied during the period 2005–2020, to test whether there is a trend change in the correlation between the level of provisions and annual earnings in 2012. Findings: The results show that from 2012 onwards (when the Bank of Spain reinforced the regulation on provisioning), there was a correction in income smoothing behaviour. Originality/value: This study provides empirical evidence that reinforces the claim that accounting policy can affect decision-making accounting practices, in this particular case, at the Bank of Spain. [ABSTRACT FROM AUTHOR]

Most activities of FinTech companies in the real world are limited to a variety of banking services such as payment and funds transfer, while the scope of banking services is much broader than the current activities of FinTech companies. In recent years, extensive research has also been conducted on how FinTech companies contribute to the provision of banking services. The present study identifies ideas for new and innovative areas of FinTech companies' activity by reviewing the relevant literature. These areas are categorized using the Banking Industry Architecture Network (BIAN) service landscape and are identified and described through thematic analysis. The outcome of this study is a model which reveals that the main service domains belong to the "banking operations and execution," "sales and services," "risk and compliance," "business support," and "reference data." According to the findings of the present research, FinTech companies have the capability to provide banking services in 22 domains out of 36 BIAN domains. Theoretical contributions and comparative analysis are discussed. [ABSTRACT FROM AUTHOR]

I study the association between bank financial reporting opacity, measured by delayed expected loan loss recognition, and the intervention decisions made by bank regulators. Examining U.S. commercial banks during the 2007–09 financial crisis, I find that delayed expected loan loss recognition is negatively associated with the likelihood of regulatory intervention (measured by either severe enforcement action or closure). This result is robust to using various specifications and research designs. In additional analyses, I find evidence suggesting that this association is driven by regulators exploiting financial reporting opacity to practice forbearance. My findings contribute to the extant literature on bank opacity, regulatory forbearance, and the consequences of loan loss provisioning by suggesting that delayed expected loan loss recognition affects regulatory intervention decisions. [ABSTRACT FROM AUTHOR]

Deferred Tax Assets represent the value of the tax on profit to be recovered at a given time, and most studies in the literature show these assets of financial institutions listed at the Central Bank of Brazil as a results manager, which in crisis scenarios national or global economy, directly impact the financial results of banks. And the objective of this study was to evaluate the use of Deferred Tax Assets as a metric for identifying earnings management by Allowance for Loan Losses (H1) of 122 banks, classified as multiples, investments and cash, listed in the Central Bank of Brazil. Brazil, during the period from 2016 to 2020, estimating the panel data regression model. The inclusion of financial institutions to detect metrics of Deferred Tax Assets in meeting the hypothesis was motivated to improve the quality of information and decisions of banks. And the results found identified significance in the use of Deferred Tax Assets as a metric for identifying earnings management by Allowance for Loan Losses. [ABSTRACT FROM AUTHOR]

This study aims to monitor a group of factors that cause liquidity risks and contribute to the occurrence of liquidity problems by testing the determinants of liquidity risk and the explanatory factors of the liquidity problem in Algerian commercial banks. This study seeks to highlight the importance of commercial banks' liquidity in financing investments to generate profits and the need to maintain appropriate levels to meet liquidity needs. Using panel data for a sample of nine Algerian banks during the period 2005-2020, the study found that the explanatory variables of the liquidity risks that cause liquidity problems in Algerian commercial banks by using the liquid assets to total assets index ratio are: return on assets, return on equity, and capital adequacy ratio, with an explanatory capacity of 59.44%. Analysis of the results of the fixed effect model showed an inverse correlation between the return on assets and liquidity risks. There was a statistically significant positive relationship between the return on equity, capital adequacy ratio, and liquidity risk. There was a negative, but not statistically significant, relationship between bank size, the loan loss provisions to total loans ratio, and liquidity risk. The study recommends that to increase the volume of assets, there should be a corresponding increase in liquid assets as a precaution against liquidity risks in Algerian banks. Also, other determinants are not addressed in the study, which requires further research into the determinants of liquidity risk in Algerian banks. [ABSTRACT FROM AUTHOR]

This study investigates the impact that market discipline mechanisms have on European Union (EU) banks' accounting policy decisions. We investigate the association between the level of loan loss provisions (LLPs) with earnings before provisions and taxes when depositors appear to withdraw their funds and demand higher deposit rates. We examine whether market discipline motivates banks to adjust earnings through accounting accruals. Empirical findings suggest that the demand for higher deposit rates limits management's accounting discretion. By contrast, withdrawals appear to encourage managers to use income smoothing via LLPs. The observed associations appear to be conditioned by banks' systemic importance and capital adequacy levels. [ABSTRACT FROM AUTHOR]

The asset quality of public sector banks in India deteriorated during 2012-2018, which has had multidimensional ramifications. On the one hand, while significant loan loss provisions were required to be kept causing erosion of profitability of these banks, on the other hand, it affected their risk-taking ability and the resources available for onlending to the commercial sector. From a macroeconomic perspective thus, poor asset quality and lower economic growth reinforced each other into a vicious cycle. The government intermittently infused capital in the public sector banks, but most of that was absorbed by the continuing deterioration in asset quality, delaying the revival in the credit growth cycle. This led to the question of how much capital infusion is necessary to kick-start the credit cycle. Using bank-wise data for the period 2008-18, the present study analyses this question in a dynamic panel framework. The findings of the study suggest that the relationship between bank capital and credit growth is non-linear. Any amount of recapitalisation in banks may be helpful in accelerating credit growth. However, the study found that the single threshold level of 13.1 per cent capital to risk weighted asset ratio (CRAR) would be optimal. Above this threshold level, incremental increase in bank capital has positive, but declining marginal effects on lending. [ABSTRACT FROM AUTHOR]

This paper investigates whether former auditors on the audit committee constrain earnings management through loan loss provisions. Based on an analysis of the annual reports of 82 African listed banks over the period 2011–2016, findings show that the presence of former auditors on an audit committee is associated with lower earnings management. This result suggests that audit committee members with auditing expertise and background contribute to effective monitoring of management's accounting practices. Furthermore, results reveal that the reducing effect on earnings management of former auditors is strongest for directors who are unaffiliated with the bank's current external auditor. [ABSTRACT FROM AUTHOR]

Purpose: This paper examines the impact of International Financial Reporting Standards (IFRS) 9 on earnings management (EM) using data from 2011 to 2019 of 100 commercial banks in Europe. Design/methodology/approach: Using data from 2011 to 2019 of 100 commercial banks in Europe, the authors conducted several empirical investigations to test the mediating role of IFRS 9 on earnings manipulation through loan loss provision (LLP) by banks. Findings: The result shows that the new accounting standards (IFRS 9) significantly affect the way banks report LLP. This paper provides evidence that non-listed banks in the EU engage in EM through LLP following IFRS 9 but experience less volatility of net income following the adoption. The findings indicate that such behaviour by banks cannot be suppressed by level of audit quality; suggesting that an improvement in accounting standards might not always guarantee accounting quality. Originality/value: This finding has some policy implications; and regulators will need to identify additional tools to regulate or supervise EM behaviour. [ABSTRACT FROM AUTHOR]

Copyright of Economy & Market Communication Review / Casopis za Ekonomiju i Trzisne Komunikacije is the property of Pan-European University Apeiron and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

We use the year-end adjustments to the provisions for student loan losses of state and provincial governments in the United States and Canada to study government accounting conservatism and how it varies between these adjacent and highly integrated countries. Building on Canada's more conservative cultural attributes, we hypothesize and find that Canadian provincial governments report more conservative provisions for student loan losses than U.S. state governments. Moreover, the year-end adjustments to the provisions in Canada are excessively conservative; they are larger than the audit materiality threshold. We further find that the political ideology of the government, government reporting incentives, government debt, and political competition are important determinants of government accounting conservatism. Finally, we find a negative association between the year-end adjustment to the provision and future student lending. This result suggests that government accounting conservatism leads to credit rationing and significant societal consequences for students. Overall, our study highlights important aspects of the determinants and consequences of government accounting conservatism. To the best of our knowledge, this study is the first to examine government unconditional accounting conservatism. [ABSTRACT FROM AUTHOR]

Auditors tend to be more conservative in their audits when they face greater litigation risk. However, it is unclear whether this conservatism is always desirable or whether it can be excessive. To evaluate the usefulness of greater auditor conservatism, we examine whether auditor conservatism improves audit quality and imposes real operating consequences for clients. We examine auditor behavior in a sample of auditors' client banks, when one of the auditor's other client banks fails (as deemed by the FDIC). We find that auditors that experience a bank failure within their portfolio become more conservative for surviving clients. However, we find that the larger loan loss provisions at surviving clients are no more timely, are less accurate, and reverse in subsequent periods. This finding suggests that auditors' initial portfolio-wide response to a specific client failure may be overly conservative. We also document that surviving client banks face real consequences in terms of constraints on their lending because of the auditor's excessive conservatism. Overall, we conclude that, in some situations, auditors may overreact, leading to excessive conservatism, which in turn has adverse consequences for clients. [ABSTRACT FROM AUTHOR]

Purpose: This study aims to investigate the role of corporate governance practices in restraining earnings management in Indian commercial banks. Design/methodology/approach: Estimation of earnings management is based on discretionary loan loss provision and discretionary realised security gains and losses using Beatty et al. (2002) model. The effect of corporate governance on earnings management is examined by performing two-way least square dummy variable regression. Data for a period of five years (2016–2020) is collected from the Centre for Monitoring Indian Economy ProwessIQ database, Reserve Bank of India website, annual report of banks, National Stock Exchange and bank's website. Findings: Regression results exhibit that number of board committees, size and independence of audit committee and joint audit are significantly effective in curbing earnings management. Other board-related variables (size, independence, meetings and diligence) and audit committee variables (meetings and diligence) are not effective in restraining earnings management in Indian banks. Practical implications: The findings may prove to be helpful to regulators, board of directors and investors. It shows the weak area of corporate governance in India that is lack of autonomy to independent directors, which needs regulators attention and it also suggests that the number of independent auditors should be adequate for audit purposes. The board of directors must ensure the formulation of an adequate number of committees, which perform their own super specialised functions. This study brings an alarm to investors not to rely on reported earnings alone as they may be manipulated. Originality/value: This paper substantiates the scant literature on the role of corporate governance practices in restraining earnings management in banks of emerging markets and to the best of the authors' knowledge impact of joint audits on earnings management is previously unexplored in Indian banks, which are examined in this study. [ABSTRACT FROM AUTHOR]

Copyright of Muhasebe ve Vergi Uygulamalari Dergisi (MUVU) / Journal of Accounting & Taxation Studies (JATS) is the property of Ankara Serbest Muhasebeci Mali Musavirler Odasi and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The increasing frequency and intensity of catastrophic natural disasters have the potential to stress and imperil banks to the point of compromised viability or even bankruptcy. Using data of approximately 907 domestic/local banks and Spatial Hazard Events and Losses Database for the United States during the period 2010–2019, we explore how natural disasters impact bank stability. Our main findings support the aforementioned hypothesis that natural disasters decrease bank stability because total deposit and equity (capital) become more volatile and the bank is prone to increased lending margins, as well as a provision of loan loss. Thus, banks lose their competitiveness, ROA deteriorates, and Z-score becomes lower. Strong corporate governance and healthy financial strategy, nevertheless, assist bank recovery in the aftermath of these weather extreme events. Last but not least, we find a non-linear relationship between natural disasters and bank stability and posit the role of indemnity paid out from the Federal insurance programme (after natural hazards) in the high-damage group. [ABSTRACT FROM AUTHOR]

This study aims to ascertain the determinants affecting the liquidity of Vietnamese Commercial Banks by their bank ownership structures, CEO characteristics, and bank-specific variables. Using panel data consisting of 29 Vietnamese commercial banks, we measure liquidity using the most up-to-date method - the Net Stable Funding Difference (NSFD), according to Basel III standards. Correlating to the relationship between CEOs' characteristics and bank liquidity, we found that CEOs with longer tenure will control liquidity better due to their higher managerial power and entrenchment. Moreover, the findings of the present study show that local market power, bank age, bank size, and loan loss provision positively impact bank liquidity. In contrast, further investigation reveals the adverse impact of state ownership on bank liquidity. This study provides insights into the prudential supervision of Vietnamese commercial banks, which has implications for policymakers, by applying the latest liquidity measurement method and new findings on liquidity determinants. [ABSTRACT FROM AUTHOR]

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This study aims to assess the influence of internal and external factors on the Efficiency of banks in Pakistan using the Data Envelopment Analysis Approach (DEA). Bank's Efficiency is measured through DEA Model using input and output variables. The input variable includes the number of employees, number of branches, administration expenses, non-interest expenses, and loan loss provisions. In contrast, the output variable consists of net interest income, net commissions, and total other income. This study considers the internal determinants of the bank's Efficiency as corporate governance, enterprise risk management, ownership structure (state, foreign, and domestic ultimate owned banks), return on equity, financial leverage, and the size of the bank. The external determinants of the bank's Efficiency include banking structure and macroeconomic conditions. The study has used data from seventeen commercial banks over the period of 2011 to 2020. The study used the Data Envelopment Analysis Approach (DEA) and Logit and Probit Regression Model to evaluate research hypotheses. The Logit model results show that corporate governance, ultimate global ownership, and return on equity have a statistically significant and positive impact on the bank's Efficiency. Enterprise risk management and financial leverage adversely affect the bank's Efficiency. Better corporate governance can help banks to control the risk and cost of capital and enhancement the effectiveness of capital. Similarly, better risk management of banks can lead to better operational and strategic decisions in the competitive banking environment. [ABSTRACT FROM AUTHOR]

This paper investigates how banks with different organizational cultures (defined as either control-dominant, collaborate-dominant, compete-dominant, create-dominant) manage their loan loss provisions (LLPs) in response to intensified industry competition. For identification, we utilize the change in state-level competition that followed the passage of the US Interstate Banking and Branching Efficiency Act (IBBEA) of 1994 as a quasi-natural experiment. We find that banks with a collaborate-dominant organizational culture are less likely to exercise discretion over LLPs. In contrast, banks with compete- and create-dominant organizational cultures are more likely to utilize discretionary LLPs when competition increases. Moreover, banks use discretionary LLPs to smooth income and signal private information to outsiders. Banks with collaborate-dominant organizational cultures exhibit less income smoothing. Counterparts with a create-dominant organizational culture use discretionary LLPs to signal information to outside stakeholders. Finally, banks with a create-dominant organizational culture are more likely to be subject to formal regulatory enforcement actions. [ABSTRACT FROM AUTHOR]

Purpose: The purpose of the current study is to identify variables that, when integrated into the random effects parametric survival model, could be used to forecast the failure rate of small banks in the USA. A bank's income production, efficiency and costs were taken into consideration when choosing the internal components. The breakout of the financial crisis, bank regulations that affect how the banking sector operates and the federal funds rate are the primary external variables. Design/methodology/approach: This study uses the random effects parametric survival model to investigate the causes of small bank failures in the USA from 1996 to 2019. The study identifies several characteristics that failed banks frequently display. The main indications that may help to identify the elevated risk of small bank failures include the ROA, the cost of funds, the ratio of noninterest income to assets, the ratio of loan and lease losses to assets, noninterest expenses and core capital (leverage) ratio to assets. Economic disruptions, financial market distress and industry-based regulatory redress by the government exacerbate the financial distress borne by small banks. Findings: The study revealed that a failed bank typically demonstrates a certain number of characteristics. The key factors that might assist identify which bank would be most likely to collapse include the cost of funding earning assets, the yield on earning assets, core Capital (leverage) ratio to assets, loan and lease loss provision to assets, noninterest expense and noninterest income to assets. Additionally, when a financial crisis occurs or the government changes regulations that could raise the cost of compliance for small banks, the likelihood that a bank will fail increases. Originality/value: Models based on survival theories are more suitable when the authors examine bank failure as a unique event that happens gradually. The authors use a random effects parametric survival model to investigate the internal and external factors that may influence prospective small bank failure. This model has been developed and used in the medicinal research field. The authors do not choose the Cox proportional hazards model because it does not work well with panel data. [ABSTRACT FROM AUTHOR]

We investigate how provisioning models interact with bank regulation to affect banks' risk‐taking behavior. We study an accuracy versus timeliness trade‐off between an incurred loss model (IL) and an expected loss model (EL) such as current expected credit loss model or International Financial Reporting Standards 9. Relative to IL, even though EL improves efficiency by prompting earlier corrective action in bad times, it induces banks to originate either safer or riskier loans. Trading off ex post benefits versus ex ante real effects, we show that more timely information under EL enhances efficiency either when banks are insufficiently capitalized or when regulatory intervention is likely to be effective. Conversely, when banks are moderately capitalized and regulatory intervention is sufficiently costly, switching to EL impairs efficiency. From a policy perspective, our analysis highlights the roles that regulatory capital and the effectiveness of regulatory intervention play in determining the economic consequences of provisioning models. EL spurs credit supply and improves financial stability in economies where intervening in banks' operations is relatively frictionless and/or regulators can tailor regulatory capital to incorporate information about credit losses. [ABSTRACT FROM AUTHOR]

Low-income (B40) women might become entrepreneurs for a variety of reasons, including motivation, resourcefulness, opportunity recognition, and entrepreneurial skills. The B40 group has been given a boost in their quality of life through a variety of initiatives, including the provision of bank loans, business facilities, and access grants. This study focuses on four factors that relate to women's motivation, resources, opportunity and ability in order to examine the entrepreneurial preparedness among the B40 women who had participated in an entrepreneurial training programme in Malaysia. Thus, this study attempts to examine the challenges faced by women especially in urban areas of B40 to increase their revenue. These studies seek to determine the readiness of low-income women for entrepreneurship, intending to increase household income in sharpening their abilities to survive in urban. By using a simple random sampling technique method, the number of samples is 102 low-income women, who have participated in the entrepreneurial enculturation program were the selected population. Unexpectedly, motivation, resources and entrepreneurial ability were found to be non-significant predictors of entrepreneurial readiness among the B40 women, although entrepreneurial opportunity appeared to be a significant predictor towards entrepreneurial readiness. Although the exclusion of motivation, resources and entrepreneurial ability did not relate towards entrepreneurial readiness, these results should be interpreted with caution. The study sheds light on an under-explored and new context to advance existing knowledge in the field. [ABSTRACT FROM AUTHOR]