Abstract
This aim of research is to prove that the loan-loss provision and fair value accounting influence the earnings volatility and the accrual management role in moderating the effect of fair value accounting to earnings volatility. Data were obtained from the annual report of the Directory of Indonesia Capital Market and the Stock Exchange of Indonesia Website. There are 81 samples as a result of a banking company's observation listed on the Stock Exchange in 2014-2016. The analysis of multiple moderated regression was used in this research. Finally, it showed that the loss-loan provision does not affect on earnings volatility, whereas the fair value accounting influenced earnings volatility positively. On the other hand, accrual management strengthens the influence of fair value accounting on earnings volatility Keywords: loss-loan provision, fair value accounting, profit volatility, and accrual management DOI : 10.7176/RJFA/11-2-16 Publication date: January 31 st 2020
Highlights
The aim of study is to find out: 1) effect of the loan-loss provision on earnings volatility; 2) effect of fair value accounting on earnings volatility; 3) role of accrual management in moderating the relationship of them
This study found that the loss loan provision did not affect the earnings volatility
Based on the series of data analyzes followed by the discussion and analysis of the role of accrual management on the factor of bank loss-loan provision and fair value accounting for earnings volatility, those are obtained several conclusions as follows: 1. The result indicates that the bank loss loan provider does not effect earnings volatility
Summary
The main theory used in this research is positive accounting that estimates and describes accounting practices by management in maintaining earnings stability. The relatively stable earnings can be controlled by a low level of profit volatility This case can be done because the asymmetric information between bank management and investors happens, so bank uses a LLP (Loan Loss Provisions) strategy (El Sood, 2012). Tessema found evidence that the higher market volatility will increase the volume of earnings so that it will motivate the manager to do greater income smoothing. The aim of study is to find out: 1) effect of the loan-loss provision on earnings volatility; 2) effect of fair value accounting on earnings volatility; 3) role of accrual management in moderating the relationship of them
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