Abstract
This paper investigates bank earnings management using loan loss provision (LLP). The paper examines income smoothing which is a type of earnings management. It compares the income smoothing behaviour of banks in the UK, France, South Africa and Egypt. The findings show that bank income smoothing is present in the UK and Egypt, and absent in France and South Africa during the period examined. Banks in Egypt used LLPs to smooth income before the global financial crisis. Meanwhile, bank income smoothing is pronounced in France during and after the financial crisis but is absent in the pre-crisis period. Also, bank income smoothing is reduced in countries that (i) have strict banking supervision, (ii) adopt common law such as the United Kingdom, and (iii) adopt civil law such as France and Egypt. Bank earnings management is also greater in countries that adopt a mixed legal system such as South Africa, and in countries that adopt IFRS accounting standards.
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