Have a personal or library account? Click to login
Accounting Discretion, Loan Loss Provision in Financial Distress: Evidence from Commercial Banks Cover

Accounting Discretion, Loan Loss Provision in Financial Distress: Evidence from Commercial Banks

Open Access
|Nov 2022

References

  1. Abdullah, M., & Ansar, M. (2013). A study on financial leverage and financial distress in the listed banks on Colombo stock exchange in Sri Lanka. Faculty of Management and Commerce SEUSL.
  2. Abubakar, A. (2015). Relationship between financial leverage and financial performance of deposit money banks in Nigeria. International Journal of Economics, Commerce and Management, 3(10), 759-778.
  3. Agarwal, S., Chomsisengphet, S., Liu, C., & Rhee, S. G. (2007). Earnings management behaviors under different economic environments: Evidence from Japanese banks. International Review of Economics & Finance, 16(3), 429-443.10.1016/j.iref.2005.08.003
  4. Ahmed, A. S., Takeda, C., & Thomas, S. (1999). Bank loan loss provisions: a reexamination of capital management, earnings management and signaling effects. Journal of accounting and economics, 28(1), 1-25.10.1016/S0165-4101(99)00017-8
  5. Al-khabash, A. A., & Al-Thuneibat, A. A. (2008). Earnings management practices from the perspective of external and internal auditors: Evidence from Jordan. Managerial Auditing Journal, 24(1), 58-80.10.1108/02686900910919901
  6. Altamuro, J., & Beatty, A. (2010). How does internal control regulation affect financial reporting? Journal of accounting and economics, 49(1), 58-74.10.1016/j.jacceco.2009.07.002
  7. Altman, E. I. (1968). Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. The journal of finance, 23(4), 589-609.10.1111/j.1540-6261.1968.tb00843.x
  8. Anandarajan, A., Hasan, I., & McCarthy, C. (2007). Use of loan loss provisions for capital, earnings management and signalling by Australian banks. Accounting & Finance, 47(3), 357-379.10.1111/j.1467-629X.2007.00220.x
  9. Aurangzeb, K. (2012). Contributions of banking sector in economic growth: A case of Pakistan. Economics and Finance Review, 2(6), 45-54.
  10. Barro, R. J., & McCleary, R. M. (2003). Religion and economic growth: National Bureau of Economic Research Cambridge, Mass., USA.
  11. Beatty, A., Chamberlain, S. L., & Magliolo, J. (1995). Managing financial reports of commercial banks: The influence of taxes, regulatory capital, and earnings. Journal of accounting research, 231-261.10.2307/2491487
  12. Bhat, V. N. (1996). Banks and income smoothing: an empirical analysis. Applied Financial Economics, 6(6), 505-510.10.1080/096031096333953
  13. Binti, S., Zeni, M., & Ameer, R. (2010). Turnaround prediction of distressed companies: evidence from Malaysia. Journal of Financial Reporting and Accounting, 8(2), 143-159.10.1108/19852511011088398
  14. Bouvatier, V., & Lepetit, L. (2008). Banks’ procyclical behavior: Does provisioning matter? Journal of international financial markets, institutions and money, 18(5), 513-526.10.1016/j.intfin.2007.07.004
  15. Boyd, J. H., & Graham, S. L. (1986). Risk, regulation, and bank holding company expansion into non-banking. Quarterly Review(Spr), 2-17.
  16. Boyd, J. H., & Runkle, D. E. (1993). Size and performance of banking firms: Testing the predictions of the theory. Journal of monetary economics, 31(1), 47-67.10.1016/0304-3932(93)90016-9
  17. Callen, J. L., & Fang, X. (2015). Religion and stock price crash risk. Journal of Financial and Quantitative Analysis, 50(1-2), 169-195.10.1017/S0022109015000046
  18. Chiaramonte, L., & Casu, B. (2016). Capital and liquidity ratios and financial distress. Evidence from the European banking industry. The British Accounting Review.
  19. Cohen, L. J., Cornett, M. M., Marcus, A. J., & Tehranian, H. (2014). Bank earnings management and tail risk during the financial crisis. Journal of Money, Credit and Banking, 46(1), 171-197.10.1111/jmcb.12101
  20. Collins, J. H., Shackelford, D. A., & Wahlen, J. M. (1995). Bank differences in the coordination of regulatory capital, earnings, and taxes. Journal of accounting research, 263-291.10.2307/2491488
  21. Cornett, M. M., McNutt, J. J., & Tehranian, H. (2009). Corporate governance and earnings management at large US bank holding companies. Journal of Corporate Finance, 15(4), 412-430.10.1016/j.jcorpfin.2009.04.003
  22. De Haan, J., & Poghosyan, T. (2012). Size and earnings volatility of US bank holding companies. Journal of Banking & Finance, 36(11), 3008-3016.10.1016/j.jbankfin.2012.07.008
  23. Desta, T. (2017). Consequence of loan loss provisions on earnings management behavior: A study on the best African commercial banks. South African Journal of Business Management, 48(3), 1-11.10.4102/sajbm.v48i3.31
  24. Dushku, E. (2016). Some Empirical Evidence of Loan Loss Provisions for Albanian Banks. Journal of Central Banking Theory and Practice, 5(2), 157-173.10.1515/jcbtp-2016-0016
  25. Flamini, V., McDonald, C. & Schumacher, L. (2009). The determinants of commercial bank profitability in Sub-Saharan Africa: International Monetary Fund Working Paper WP/09/15.10.5089/9781451871623.001
  26. Ghosn, F. (2019). Testing Z-Score Model on Lebanese Listed Banks. Research Journal of Finance and Accounting, 10(12), 78-85.
  27. Gujarati, D. N. (2009). Basic econometrics: Tata McGraw-Hill Education.
  28. Hamdi, F. M., & Zarai, M. A. (2012). Earnings management to avoid earnings decreases and losses: empirical evidence from the Islamic banking industry. Research Journal of Finance and Accounting, 3(3), 88-107.
  29. Hausman, J. A. (1978). Specification tests in econometrics. Econometrica: Journal of the econometric society, 1251-1271.10.2307/1913827
  30. Healy, P. M., & Wahlen, J. M. (1999). A review of the earnings management literature and its implications for standard setting. Accounting Horizons, 13(4), 365-383.10.2308/acch.1999.13.4.365
  31. Hoffmann, P. S. (2011). Determinants of the Profitability of the US Banking Industry. International Journal of Business and Social Science, 2(22).
  32. Ignatov, A. (2006). Valuation of distress company (Monograph).
  33. Kanagaretnam, K., Lobo, G. J., & Mathieu, R. (2004). Earnings management to reduce earnings variability: evidence from bank loan loss provisions. Review of Accounting and Finance.10.1108/eb043399
  34. Kanagaretnam, K., Lobo, G. J., & Yang, D. H. (2004). Joint tests of signaling and income smoothing through bank loan loss provisions. Contemporary accounting research, 21(4), 843-884.10.1506/UDWQ-R7B1-A684-9ECR
  35. Kanagaretnam, K., Krishnan, V. G. & Lobo, J. G. (2010). An empirical analysis of auditor independence in the banking industry. The Accounting Review, 85(6), 2011-2046.10.2308/accr.2010.85.6.2011
  36. Karels, G. V., & Prakash, A. J. (1987). Multivariate normality and forecasting of business bankruptcy. Journal of Business Finance & Accounting, 14(4), 573-593.10.1111/j.1468-5957.1987.tb00113.x
  37. Karim, M. Z. A., Chan, S.-G., & Hassan, S. (2010). Bank efficiency and non-performing loans: Evidence from Malaysia and Singapore. Prague Economic Papers, 2(2010), 118-132.
  38. Khaddafi, M., Heikal, M., & Nandari, A. (2017). Analysis of Z-score to predict bankruptcy in banks listed on the Indonesia stock exchange. International Journal of Economics and Financial Issues, 7(3), 326-330.
  39. Köhler, M. (2015). Which banks are more risky? The impact of business models on bank stability. Journal of Financial Stability, 16, 195-212.10.1016/j.jfs.2014.02.005
  40. Leventis, S., Dimitropoulos, E. P. & Anandarajan, A, (2011). Loan loss provisions, earnings management and capital management under IFRS: The case of EU commercial banks. Journal of Financial Services Research, 40(1-2), 103-122.10.1007/s10693-010-0096-1
  41. Liberty, S. E., & Zimmerman, J. L. (1986). Labor union contract negotiations and accounting choices. Accounting Review, 692-712.
  42. Macey, J. R., & O’hara, M. (2003). The corporate governance of banks. Economic Policy Review, 9(1).
  43. Othman, H. B., & Mersni, H. (2014). The use of discretionary loan loss provisions by Islamic banks and conventional banks in the Middle East region. Studies in Economics and Finance.10.1108/SEF-02-2013-0017
  44. Ozili, P. K. (2017). Non-performing loans and Financial Development: New Evidence.10.2139/ssrn.2892911
  45. Peasnell, K. V., Pope, P. F., & Young, S. (2000). Detecting earnings management using cross-sectional abnormal accruals models. Accounting and Business Research, 30(4), 313-326.10.1080/00014788.2000.9728949
  46. Perez, D., Salas-Fumas, V., & Saurina, J. (2008). Earnings and capital management in alternative loan loss provision regulatory regimes. European Accounting Review, 17(3), 423-445.10.1080/09638180802016742
  47. Quttainah, M. A., Song, L., & Wu, Q. (2013). Do Islamic banks employ less earnings management? Journal of International Financial Management & Accounting, 24(3), 203-233.10.1111/jifm.12011
  48. Roy, A. (1952). Safety first and the holding of assets, Economet Rica 20: 431–449.10.2307/1907413
  49. Rudiawarni, F. A., & Budianto, I. S. (2022). Opportunistic Behavior and Financial Distress: The Case of Earnings Management Modeling Economic Growth in Contemporary Indonesia (pp. 171-185): Emerald Publishing Limited.
  50. Schipper, K. (1989). Commentary on earnings management. Accounting Horizons, 3(4), 91-102.
  51. Scott, W. R. (2012). Financial Accounting Theory 6th edition’. NY: Pearson Prentice Hall.
  52. Shawtari, F. A., Saiti, B., Razak, S. H. A., & Ariff, M. (2015). The impact of efficiency on discretionary loans/finance loss provision: A comparative study of Islamic and conventional banks. Borsa Istanbul Review, 15(4), 272-282.10.1016/j.bir.2015.06.002
  53. Shen, C.-H., & Chih, H.-L. (2005). Investor protection, prospect theory, and earnings management: An international comparison of the banking industry. Journal of Banking & Finance, 29(10), 2675-2697.10.1016/j.jbankfin.2004.10.004
  54. Strobel, F. (2011). Bank insolvency risk and Z-score measures with unimodal returns. Applied Economics Letters, 18(17), 1683-1685.10.1080/13504851.2011.558474
  55. Taktak, N. B., Zouari, S. B. S., & Boudriga, A. (2010). Do Islamic banks use loan loss provisions to smooth their results? Journal of Islamic Accounting and Business Research, 1(2), 114-127.10.1108/17590811011086714
  56. Van Oosterbosch, R. (2010). Earnings Management in the Banking Industry.
  57. Vazquez, F., & Federico, P. (2015). Bank funding structures and risk: Evidence from the global financial crisis. Journal of Banking & Finance, 61, 1-14.10.1016/j.jbankfin.2015.08.023
  58. Wahlen, J. M. (1994). The nature of information in commercial bank loan loss disclosures. Accounting Review, 455-478.
  59. Yohannes, R. (2021). Financial Distress Conditions of Commercial Banks in Ethiopia: An Application of Altman’s Z-Score 1993 Model. Available at SSRN 3806360.
  60. Zoubi, A. T. & Alkhazali, O. (2007). Empirical testing of the loss provisions of banks in the GCC region. Managerial Finance, 33(7), 500-511.10.1108/03074350710753771
DOI: https://doi.org/10.2478/zireb-2022-0012 | Journal eISSN: 1849-1162 | Journal ISSN: 1331-5609
Language: English
Page range: 1 - 18
Published on: Nov 20, 2022
Published by: University of Zagreb, Faculty of Economics & Business
In partnership with: Paradigm Publishing Services
Publication frequency: 2 issues per year

© 2022 Amina Malik, Shahab Ud Din, Khuram Shafi, Babar Zaheer Butt, Haroon Aziz, published by University of Zagreb, Faculty of Economics & Business
This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.