Big 4 auditors, bank earnings management and financial crisis in Africa

Ozili, Peterson Kitakogelu (2021): Big 4 auditors, bank earnings management and financial crisis in Africa. Published in: Journal of Financial Reporting and Accounting

Abstract

This paper examines whether African banks audited by a Big 4 auditor use loan loss provisions for earnings management purposes before, during and after the global financial crisis. It focuses on income smoothing as a type of earnings management. Using bank data from 21 African countries from 2002 to 2014, the results show that African banks audited by a Big 4 auditor use loan loss provisions to smooth income and the incentive to smooth income is greater during recessionary periods. Also, African banks audited by a Big 4 auditor use income smoothing to lower high earnings during the financial crisis and in the pre-financial crisis period but not in the post-financial crisis period.

• Item Type: MPRA Paper
• Language: English
• Keywords: Loan loss provision, banks, audit quality, Big 4 auditor, income smoothing, financial crisis, earnings management, economic cycles, recession, earnings smoothing
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services > G20 - General; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M0 - General > M00 - General; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing > M40 - General; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing > M41 - Accounting; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing > M42 - Auditing; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing > M48 - Government Policy and Regulation; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing > M49 - Other

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