Accounting scholars and policy-makers have expressed concern about the quality of accounting data. Because earnings and capital management practices alter the information content of accounting statements, we ask whether a transparent smoothing device such as the statistical provision - a counter-cyclical bank loan loss provision that increases in economic upturns and decreases in downturns, and is reported separately by banks - may contribute to improving quality of accounting data. We find that Spanish banks use loan loss provisions to smooth earnings but we find no evidence that they practice capital management. We also find that credit risk variables weigh more and net operating income weighs less as determinants of generic and specific loan loss provisions after the introduction of the statistical provision than they did before this provision was introduced. Therefore, the quality of banks' accounting statements improves upon use of the new statistical provision.

No abstract

This paper examines the contribution of investments in Information Technology (IT) and in advertising to the output and profits of Spanish banks, in the period 1983-2003. We find that the growth in the stock of IT capital explains one third of output growth of banks, and that an additional investment in IT of one million euros may be substituted for twenty-five workers.The paper also finds that advertising investments increase the demand for bank services with an elasticity of 0.22 for deposits and 0.11 for loans. For all the assets considered, the null hypothesis that banks use the profit-maximizing amount of services per period cannot be rejected with the data. JEL classification: G21; D24.

No abstract