Banking sector earnings management using loan loss provisions in the Fintech era

Ozili, Peterson K (2021): Banking sector earnings management using loan loss provisions in the Fintech era. Forthcoming in:

Abstract

This paper analyse banking sector earnings management using loan loss provisions in the Fintech era. The findings show evidence for bank income smoothing using loan loss provisions. There is greater income smoothing in the second-wave Fintech era compared to the first-wave Fintech era, and the presence of strong institutions did not lower income smoothing in the second wave era. Bank income smoothing is also greater in (i) BIS and EU countries than in non-EU countries and G7 countries, (ii) well-capitalised banking sectors, and (iii) during economic booms, in the second wave Fintech era. The implication is that the competition for loans and deposits by banks and Fintech lenders in the second-wave Fintech era created additional incentives for banks to engage in income smoothing to report competitive and stable earnings

• Item Type: MPRA Paper
• Language: English
• Keywords: banking sector, income smoothing, regulatory quality, legal quality, market power, Fintech, nonperforming loans, earnings smoothing, loan loss provisions, earnings management, digital finance.
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; G - Financial Economics > G2 - Financial Institutions and Services > G23 - Non-bank Financial Institutions ; Financial Instruments ; Institutional Investors; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M0 - General; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing; 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

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