Bank Income Smoothing, Institutions and Corruption

Ozili, Peterson K (2019): Bank Income Smoothing, Institutions and Corruption. Forthcoming in: Research in International Business and Finance

Abstract

This study investigates bank income smoothing, focusing on the effect of corruption on the extent of income smoothing by African banks. I find that banks use loan loss provisions to smooth positive (non-negative) earnings particularly in the post-2008 crisis period and this behaviour is reduced by strong investor protection. Also, I find that banks in highly corrupt environments smooth their positive (non-negative) earnings as opposed to smoothing the entire profit distribution. Finally, cross-country variation in bank income smoothing is observed. The findings have implications.

• Item Type: MPRA Paper
• Language: English
• Keywords: Loan loss provisions, Earnings Management, Investor Protection, Corruption, Income Smoothing, Bank, Profitability,
• 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 > G28 - Government Policy and Regulation; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing > M48 - Government Policy and Regulation

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