Accounting for Financial Stability: Lessons from the Financial Crisis and Future Challenges

Bischof, Jannis; Laux, Christian; Leuz, Christian

doi:10.2139/ssrn.3393148

Cited by 12 publications

(16 citation statements)

References 91 publications

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“…It has been determined that corporate governance and accounting and auditing standards have the same effect on macroeconomic stability. There are estimates in the literature that the deliberate or unintentional misapplication of accounting and auditing standards may have effects on the triggering of some financial crises (see, e.g., Arnis et al, 2019;Bischof et al, 2019;Figlioli et al, 2017 ;Menicucci & Paolucci, 2017;Kothari & Lester, 2012;Huizinga & Laeven, 2012;Arnold, 2009).…”

Section: Empirical Results and Discussionmentioning

confidence: 99%

“…Finding that fair value accounting did not have an important role in the financial crisis of 2008. However, Bischof et al (2019) noted in their study that there is little evidence on the role of fair value accounting in asset price bubbles.…”

Section: Analysing Relationship Between Accounting and Financial Stabilitymentioning

confidence: 96%

“…Finding that there is a relationship between political and social determinants and macroeconomic stability. Bischof, Laux, and Leuz (2019).…”

Section: Analysing Relationship Between Fair Value Accounting and Financial Crisismentioning

confidence: 99%

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An Empirical Analysis for the Effects of Accounting and Auditing Standards and Corporate Governance on Macroeconomic Stability

Çalışkan¹,

Sarıdoğan²

2021

jepr

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Macroeconomic stability is important for a country's sustainable economic growth and social welfare. There are many economic and political factors affecting macroeconomic stability at sectoral, national and international levels. In financial system, while investors lend their savings to companies, they decide according to performance indicators of companies in financial statements. However, accuracy and reliability of information in financial statements of companies depends on level of development in accounting and auditing standards on one hand, and on corporate management capacity on other. There is asymmetrical information about accuracy of financial information of firm between company managers and investors who want to invest in company. This asymmetrical information can cause investors to make wrong choices, triggering financial and economic instability. In this context, developments in accounting and auditing standards and corporate governance level play an important role in solving asymmetric information problem and maintaining macroeconomic stability. In this context, main purpose of this study is to analyse empirically effects of accounting and auditing standards and corporate governance on macroeconomic stability. According to results of study; explanatory variables, Corporate governance and Strength auditing accounting standards affect dependent variable in same direction. The improvement of Accounting and Auditing standards and Corporate Governance climate is important not only for strengthening of firms and sectors, but also for national macroeconomic stability. As a result, giving sufficient importance to development of accounting and auditing standards and corporate governance in economic policy designs will contribute to preservation and strengthening of macroeconomic stability.

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Section: Empirical Results and Discussionmentioning

confidence: 99%

Section: Analysing Relationship Between Accounting and Financial Stabilitymentioning

confidence: 96%

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An Empirical Analysis for the Effects of Accounting and Auditing Standards and Corporate Governance on Macroeconomic Stability

Çalışkan¹,

Sarıdoğan²

2021

jepr

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“…Finally, results presented in this paper are also relevant from a regulatory perspective, because it is essential to understand whether and how the interaction of accounting standards with capital regulation may carry unintended consequences (Bischof et al, 2019;Laux & Leuz, 2009). Therefore, our evidence may be useful to regulators such as the Federal Deposit Insurance Corporation (FDIC) and others when assessing the safety and soundness of financial institutions.…”

Section: Introductionmentioning

confidence: 89%

Real regulatory capital management and bank payouts: Evidence from available‐for‐sale securities

Fabrizi

Ipino

Magnan

et al. 2021

Business Fin & Account

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This study examines whether payout policies create incentives for banks to engage in cherry-picking activities using available-for-sale (AfS) securities, otherwise known as gains trading. Such activities are more likely to arise in situations in which capital ratios would otherwise constrain banks' ability to distribute resources to shareholders. Using a large sample comprising 766 unique US banks, we find a significant and positive association between total payout and realized gains on AfS securities for banks with low regulatory capital. This is consistent with the conjecture that capital-constrained banks engage in gains trading to free up resources for dividend payments or share repurchases. When partitioning our sample, we find that capital-constrained banks realize gains and losses on AfS securities only when it is costly to decrease the payout and when the monitoring level is weaker. Further analyses reveal that banks engaging in gains trading to distribute cash to shareholders exhibit significantly higher levels of future default risk and more negative extreme bankspecific daily returns, patterns that are consistent with riskshifting. Finally, with the advent of Basel III, the practice seems to continue among banks that chose to retain prudential filters.This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.

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“…al., 2010;Lybeck, 2012). Instead, other researchers have a more moderate position, considering that essential drivers could be considered as well the ineffective compensating controls designed to prevent noncompliance of accounting practice with financial reporting regulation (Barth & Landsman, 2010;Bischof et. al., 2019).…”

Section: Data Collectionmentioning

confidence: 99%

Analysis on the Effects of Quality of Financial Statements, Over GDP Forecasting Models. An Empirical Cross-Country Approach

Burcă

Mateș

Bogdan

2020

Studies in Business and Economics

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Under increasing macroeconomic uncertainty, governments base their economic policies on high-precision GDP estimates. The models considered based on building-up government budgets incorporate main drivers of economic growth, identified along a large range of empirical studies, mostly focused on economic productivity, factor accumulation, human capital, innovation and transfer of technology, structural changes, or institutional framework. However, there is little evidence related to the impact of accounting and assurance regulation on economic growth. Our study attempts to assess the significance of causal relation between forecasting error on GDP growth and quality of accounting standards, respectively quality of financial statements. The study analyzes the causal relation between country level measures of quality of financial reporting, synthetized by Isidro et. al. (2019), and the measure of GDP growth estimate mean error. Our results confirm a significant impact of quality of the output of financial reporting practice, related to disclosure quality and asymmetric timeliness. The results remain similar, even after controlling for accounting convergence influence. Checking for robustness of the model, we observe the main drivers of one year ahead GDP forecast error are related to institutional framework to issue high quality standards and enforce them properly. The results emphasize once again the role of economic development and corresponding complexity of economic activities and political framework impact on accounting regulation and subsequently on macroeconomic measures.

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Accounting for Financial Stability: Lessons from the Financial Crisis and Future Challenges

Cited by 12 publications

References 91 publications

An Empirical Analysis for the Effects of Accounting and Auditing Standards and Corporate Governance on Macroeconomic Stability

An Empirical Analysis for the Effects of Accounting and Auditing Standards and Corporate Governance on Macroeconomic Stability

Real regulatory capital management and bank payouts: Evidence from available‐for‐sale securities

Analysis on the Effects of Quality of Financial Statements, Over GDP Forecasting Models. An Empirical Cross-Country Approach

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