IFRS 9 and earnings management: the case of European commercial banks

Nnadi, Matthias; Keskudee, Atis; Amaewhule, Wey

doi:10.1108/ijaim-09-2022-0203

Cited by 5 publications

(4 citation statements)

References 68 publications

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“…This statistically more significant relevance in the previous ICL model, regarding the management of earnings and equity by Portuguese banks in the recognition of LLP, aligns with studies reporting delays in recognizing LLP in the ICL model of IAS 39 and even hiding inevitable losses (Gebhard & Novotny-Farkas, 2011;Hoogervorst, 2014). The unified European regulation, through the EBA, may have minimized the impact of LLP recognition on earnings management in the ECL model compared to ICL (Nnadi et al, 2023), thereby demonstrating that regulation is important in minimizing the possibility of earnings management, providing discipline and transparency to the market (Onali et al, 2021).…”

Section: Analysis and Discussion Of Resultsmentioning

confidence: 99%

“…As previously mentioned, Onali et al (2021) suggest that the ECL model could lead to greater banking transparency and more effective market discipline. A recent study by Nnadi et al (2023) found an increase in earnings management among banks outside the EU following the introduction of IFRS 9, with no evidence of any difference in earnings management behavior for banks within the EU. Conversely, Norouzpour et al (2023) observed a general increase in earnings and equity management following the adoption of IFRS 9, highlighting that this increase was observed in banks located in countries with low regulation.…”

Section: Analysis Of the Ifrs 9 Ecl Modelmentioning

confidence: 92%

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Impacts of the Expected Loss Model on Pro-Cyclicality, Earnings Management, and Equity Management

Resende,

Carvalho,

Carmo

2023

Preprint

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This article delves into the pro-cyclicality of Loan Loss Provisions (LLPs) and earnings management, along with equity management, in Portuguese banks against the backdrop of implementing the IFRS 9's Expected Credit Loss (ECL) model. It concentrates on how LLPs mirror economic cycles and financial management practices, providing valuable insights into the operational dynamics of the Portuguese banking sector, marked by distinct economic and regulatory challengesThe research examined a sample of five Portuguese commercial banks, chosen from a group of seventeen in the Portuguese Banking Association. Data spanning from 2013 to 2022 were manually gathered. A multiple linear regression model was employed to scrutinize the relationship between LLPs and variables indicative of economic cycles and the earnings and equity management. The methodology aligns with the approaches of Araújo et al. (2018), Beatty and Liao (2014), and Casta et al. (2019). The analysis indicates a pro-cyclicality in LLPs within the Portuguese context, with a positive response of LLPs to economic indicators like unemployment. Contrarily, the extent of earnings and equity management under the ECL model was less marked compared to the Incurred Credit Loss (ICL) model, suggesting the impact of more stringent regulatory measures. The research corroborates the pro-cyclicality of LLPs in Portuguese banks under the ECL framework, underscoring the necessity for ongoing monitoring and refinement of models for forecasting and recognizing credit losses. The findings point to an area for improvement in financial management practices, despite regulatory enhancements, to promote transparency and ensure financial stability.

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Section: Analysis and Discussion Of Resultsmentioning

confidence: 99%

Section: Analysis Of the Ifrs 9 Ecl Modelmentioning

confidence: 92%

Impacts of the Expected Loss Model on Pro-Cyclicality, Earnings Management, and Equity Management

Resende,

Carvalho,

Carmo

2023

Preprint

View full text Add to dashboard Cite

show abstract

“…This more statistically significant relevance in the previous ICL model, regarding the management of earnings and equity by Portuguese banks in the recognition of LLP, aligns with studies reporting delays in recognizing LLP in the ICL model of IAS 39 and even hiding inevitable losses (Gebhardt and Novotny-Farkas 2011;Hoogervorst 2014). The unified European regulation, through the EBA, may have minimized the impact of LLP recognition on earnings management in the ECL model compared to ICL (Nnadi et al 2023), thereby demonstrating that regulation is important in minimizing the possibility of earnings management, providing discipline and transparency to the market (Onali et al 2021).…”

Section: Discussionmentioning

confidence: 99%

“…Therefore, standard-setters' concerns might not be safeguarded, as the dynamic provisions present in this new model can potentially promote earnings management, impairing the transparency of financial statements (FASB-IASB 2009). Studies have shown mixed results regarding the impact of IFRS 9 on earnings management, with some indicating an increase in such practices, especially in less regulated environments (Nnadi et al 2023;Norouzpour et al 2023).…”

Section: Impact Of Dynamic Models On Economic Cycles Managementmentioning

confidence: 99%

Impacts of the Expected Credit Loss Model on Pro-Cyclicality, Earnings Management, and Equity Management in the Portuguese Banking Sector

Resende,

Carvalho,

Carmo

2024

JRFM

View full text Add to dashboard Cite

This article delves into the pro-cyclicality of loan loss provisions (LLPs) and earnings management, along with equity management, in Portuguese banks against the backdrop of implementing the IFRS 9’s expected credit loss (ECL) model. It concentrates on how LLPs mirror economic cycles and financial management practices, providing valuable insights into the operational dynamics of the Portuguese banking sector, marked by distinct economic and regulatory challenges. The research examined a sample of five Portuguese commercial banks, chosen from a group of seventeen in the Portuguese Banking Association. Data spanning from 2013 to 2022 were manually gathered. A multiple linear regression model was employed to scrutinize the relationship between LLPs and variables indicative of economic cycles and the earnings and equity management. The methodology use was a multiple linear regression model. The analysis indicates a pro-cyclicality in LLPs within the Portuguese context, with a positive response of LLPs to economic indicators like unemployment. Contrarily, the extent of earnings and equity management under the ECL model was less marked compared to the incurred credit loss (ICL) model, suggesting the impact of more stringent regulatory measures. The research corroborates the pro-cyclicality of LLPs in Portuguese banks under the ECL framework, underscoring the necessity for ongoing monitoring and refinement of models for forecasting and recognizing credit losses. The findings point to an area for improvement in financial management practices, despite regulatory enhancements, to promote transparency and ensure financial stability.

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Exploring the organizational and social drivers of social media analytics: the domino effect in Fintech innovation

Al-Omoush,

Alghusin

2024

IJAIM

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Purpose This study aims to examine organizational and social capital’s impact on adopting social media analytics (SMA) in the banking sector. It also explores the effects of SMA on competition analysis and Fintech innovation. Moreover, the study investigates the mediating impact of competition analysis on the relationship between SMA and Fintech innovation. Design/methodology/approach Data were collected from 284 respondents and analyzed using the SEM-PLS path modeling technique. Findings The findings confirm a significant role of organizational and social capital in adopting SMA. This study also indicates a significant impact of SMA on competition analysis and Fintech innovation. Moreover, it reveals a significant mediating impact of competition analysis on the association between SMA and Fintech innovation. Originality/value This study provides invaluable contributions for both academic and banking industry professionals. The study aimed to fill the literature gap, where there is a lack of an integrated framework examining how organizational capital, social capital, SMA and competition analysis interact to create Fintech innovations in the banking sector. It also offers novel implications to banking sector stakeholders, providing them with a thorough understanding of SMA’s importance and pivotal role and the drivers of finding innovative Fintech solutions.

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IFRS 9 and earnings management: the case of European commercial banks

Cited by 5 publications

References 68 publications

Impacts of the Expected Loss Model on Pro-Cyclicality, Earnings Management, and Equity Management

Impacts of the Expected Loss Model on Pro-Cyclicality, Earnings Management, and Equity Management

Impacts of the Expected Credit Loss Model on Pro-Cyclicality, Earnings Management, and Equity Management in the Portuguese Banking Sector

Exploring the organizational and social drivers of social media analytics: the domino effect in Fintech innovation

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