Determinants of bank income smoothing using loan loss provisions in the United Kingdom

Ozili, Peterson K (2022): Determinants of bank income smoothing using loan loss provisions in the United Kingdom. Forthcoming in: Journal of Economic and Administrative Science

Abstract

This paper investigates the determinants of bank income smoothing using loan loss provisions in the United Kingdom from 1999 to 2017. The findings show that UK banks use loan loss provisions for income smoothing purposes. Income smoothing is greater in times of high economic policy uncertainty. The extent of bank income smoothing is reduced by foreign bank presence, UK GAAP adoption, IFRS9 adoption, and high levels of voice and accountability. Also, there is reduced income smoothing using loan loss provisions during a financial crisis and in periods of economic prosperity. The implication is that economic conditions, institutional governance and accounting disclosure rules influence the extent of bank income smoothing in the United Kingdom. The findings of the study contribute to several studies that explore the determinants of bank income smoothing in a single country context.

• Item Type: MPRA Paper
• Language: English
• Keywords: banks, earnings management, United Kingdom, loan loss provisions, income smoothing, economic policy uncertainty, Great Britain, accounting disclosure, financial crisis.
• 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 > M0 - 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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