Loan Loss Provisions and Earnings Management in Malaysian Banking Industry

Abdullah, Hasni; Bujang, Imbarine; Ahmad, Ibrahim A.

doi:10.35609/gjbssr.2013.1.1(10)

Cited by 3 publications

(5 citation statements)

References 20 publications

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“…(2014) and Nikulin and Downing (2021). More evidence of the use of LLPs for earnings smoothing/management is also identifiable with findings of Abdullah et al. (2013), Adzis et al.…”

Section: Literature Reviewmentioning

confidence: 66%

“…At country-level, the use of LLPs for earnings management/ smoothing are found by Alali andJaggi (2011), El Sood (2012), Dolar (2016Dolar ( ), P erez et al (2008, AJEB Carbo-Valverde and Rodriguez-Fernandez (2018), Pinho and Martins (2009), Curcio et al (2014) and Nikulin and Downing (2021). More evidence of the use of LLPs for earnings smoothing/management is also identifiable with findings of Abdullah et al (2013), Adzis et al (2015), Misman and Ahmad (2011), Chang et al (2008), Floro (2010, Skała (2014), Fernando and Ekanayake (2015), Acar and Ipci (2015), Dushku (2016), Schechtman and Takeda (2018), Muriu and Josea (2020), Le et al (2021) and Pandey et al (2022). For cross-country studies, the empirical findings of positive relationship between LLPs and EBTL, are traceable to the works of Hasan and Wall (2004), Zoubi and Al-Khazali (2007), Fonseca and Gonz alez (2008), Bouvatier and Lepetit (2012), Bushman and Williams (2012), Olson and Zoubi (2014), Curcio and Hasan (2015), Abdullah et al (2017), Elnahass et al (2018), Skała (2018), Zainuldin and Lui (2020), Doan et al (2020) and Ozili (2022a).…”

Section: Previous Empirical Findings and Hypotheses Developmentmentioning

confidence: 80%

“…,Kanagaretnam et al (2003),Chang et al (2008Chang et al ( ), P erez et al (2008,Ashour (2011), El Sood (2012,Abdullah et al (2013),Olson and Zoubi (2014),Curcio and Hasan (2015),Abdullah et al (2017), Carbo-Valverde andRodriguez-Fernandez (2018) andShala and Toçi (2021), while mixed findings were reported byCollins et al (1995),Alessi et al (2014),Adzis et al (2015), Abu-Serdaneh (…”

mentioning

confidence: 98%

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Bank capital, earnings smoothing and provisioning practices in Nigeria: IFRS and risk evidence

Salami,

Uthman

2023

AJEB

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PurposeThis study empirically tests the use of loan loss provisions (LLPs) for earnings and capital smoothing when emphasis is laid on banks' riskiness and adoption of the International Financial Reporting Standards (IFRSs) in Nigeria.Design/methodology/approachAnnual bank-level data are hand-extracted between 2007 and 2017 from annual reports of a sample 16 deposit money banks (DMBs), and analysed using appropriate panel regression models subsequent to a number of diagnostic tests including heteroscedasticity, autocorrelation and cross-sectional dependence. The use of both reported LLPs (TLLP) and discretionary LLPs (DLLP) for earnings and capital management is tested to advance the practice in the literature.FindingsGenerally, the study finds that Nigerian DMBs manage capital via LLPs, while mixed results are obtained for earnings smoothing. However, during IFRS, Nigerian DMBs' management of capital is identifiable with TLLP, while smoothing of earnings is peculiar to DLLP. Additionally, evidence of the improvement in loan loss reporting quality expected during IFRS for riskier Nigerian DMBs, could not be attained. This is corroborated by the study's findings of the use of both TLLP and DLLP for earnings and capital management during IFRS by DMBs in solvency crisis against the only use of TLLP to manage capital found for the entire period.Practical implicationsThe evidential capital and earnings lopsidedness may subject Nigerian DMBs' going-concern to a lot of questions.Originality/valueThe study sets a foremost record in the empirical test of managerial opportunistic behaviour embedded in earnings and capital concurrently while accounting for loan losses by all categories of Nigerian DMBs in terms of riskiness, following accounting regime change.

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“…(2014) and Nikulin and Downing (2021). More evidence of the use of LLPs for earnings smoothing/management is also identifiable with findings of Abdullah et al. (2013), Adzis et al.…”

Section: Literature Reviewmentioning

confidence: 66%

Section: Previous Empirical Findings and Hypotheses Developmentmentioning

confidence: 80%

mentioning

confidence: 98%

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Bank capital, earnings smoothing and provisioning practices in Nigeria: IFRS and risk evidence

Salami,

Uthman

2023

AJEB

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“…While the case of use of LLPs for earnings smoothing and capital management is also evident in the Malaysian context as reported by Misman and Ahmad (2011), the distinctions made between conventional and Islamic banks report lower coefficient of earnings smoothing and positive coefficient of capital management for Islamic banks. Further Malaysian evidence by Abdullah et al (2013), Karimiyana et al (2014) and Adzis et al (2015) showsthe use of LLPs for various managerial discretionary decisions except for few mixed results. The positive coefficient of measure of capital management found by Abdullah et al (2013) and Adzis et al (2015) shows the lack of use of LLPs to manage capital while negative coefficient of measure of earnings signalling found by Adzis et al (2015) indicates non-use of LLPs to signal financial strength of Malaysian commercial banks.…”

Section: Managerial Discretionary Decisions and Loan Loss Provisionsmentioning

confidence: 99%

“…Further Malaysian evidence by Abdullah et al (2013), Karimiyana et al (2014) and Adzis et al (2015) showsthe use of LLPs for various managerial discretionary decisions except for few mixed results. The positive coefficient of measure of capital management found by Abdullah et al (2013) and Adzis et al (2015) shows the lack of use of LLPs to manage capital while negative coefficient of measure of earnings signalling found by Adzis et al (2015) indicates non-use of LLPs to signal financial strength of Malaysian commercial banks.…”

Section: Managerial Discretionary Decisions and Loan Loss Provisionsmentioning

confidence: 99%

Managerial discretions and loan loss provisions in Nigerian banks

Salami

Uthman

Owoade

2022

CEREM

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Aim: The high level of non-performing exposures and the existing crisis in the Nigerian banking sector is a source of concern. To create a basis for solving the troubles caused by the loan loss crisis, this study investigated the managerial discretionary use of loan loss provisions (LLPs) by Nigerian deposit money banks (DMBs). This is considered in the context of solvency risk and reforms embedded in the adoption of International Financial Reporting Standards (IFRSs). Design/research methods: Datasets related to the variables of the study were hand-collected from annual reports of a sample of 16 Nigerian deposit money banks over the period of 2007-2017. The analyses were performed using principal components analysis to derive the managerial discretions index (MDI), Prais-Winsten ordinary least square regression to segregate LLP into reported LLPs (TLLP) and discretionary LLPs (DLLP) and appropriate panel data regression models to test the study’s hypotheses subsequent to series of diagnostic tests. Conclusions/findings:The results revealed that managerial discretions negatively influence TLLP and DLLP represented by absolute value of DLLP (ADLLP). This represents an increase in profitability without manipulatingloan loss provisions. However, the reforms embedded in IFRSs revealed the use of LLPs for managerial discretions despite reduction in provisioning level noticeable during IFRS. The situation of Nigerian banks threatened by solvency risk use of LLPs for managerial discretions while attempting to increase profit was exemplified in the increase in ADLLP rather than TLLP. However, improvement was noticeable for risky Nigerian banks during IFRS. The managerial discretionary use of LLPs especially during IFRS was engendered by use of LLPs for capital management and earnings smoothing rather than earnings signalling as further revealed. This shows that adoption of International Financial Reporting Standards reduces reporting quality of Nigerian banks in their loan loss decisions. Originality/value of the article: The derivation of MDI from measures of earnings smoothing, capital management and earnings signalling is the study’s contribution to accounting for loan losses literature. The adjustments to LLPs to reduce variability of earnings, meet up with minimum regulatory bank capital adequacy ratio and signal strength to absorb future losses encapsulate earnings smoothing, capital management and earnings signalling respectively. Implications of the research:The discretionary use of LLPs found in this study beckons an increased level of surveillance, oversights and reforms on the part of the regulators for compliance level devoid of managerial opportunistic behaviour to be identifiablewith Nigerian banks. JEL: D22, G21, G28, L20, M41.

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Türk Bankacılık Sektöründe Kar Yönetimi Uygulamaları: Borsa İstanbul Örneği

DOĞAN>

DİNÇ

2023

Muhasebe Ve Vergi Uygulamaları Dergisi

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Kar yönetimi, şirketlerin hedeflenen dönem karına ulaşmak için genel kabul görmüş muhasebe ilkeleri, muhasebe standartları ve yasal düzenlemelerdeki esnekliklerden faydalanarak finansal sonuçlarını gerçeğe uygun olmayan bir şekilde raporlamasıdır. Bu çalışmada ekonomik ve finansal sistem içerisinde en önemli role sahip olan bankaların kar yönetimi uygulamalarına başvurup başvurmadıklarının panel veri analizi yöntemiyle tespit edilmesi amaçlanmaktadır. Ayrıca kredi kayıp karşılıkları ile sürdürülen faaliyetler vergi öncesi kar değişkenleri arasındaki nedensellik ilişkisi hem panel geneli hem de panel birimleri için Emirmahmutoğlu ve Köse (2011) Panel Granger Nedensellik Testi kullanılmıştır. Bu amaç doğrultusunda, Borsa İstanbul (BİST)’da işlem gören kamu, özel ve yabancı sermayeli on ticari bankanın 2009-2019 yılları arasındaki çeyrek dönemlik faaliyet raporları örneklem olarak ele alınmıştır. Bankaların anılan faaliyet yıllarını kapsayan finansal tablolarındaki aktif toplamları, krediler ve alacaklar, takipteki krediler, kredi kayıp karşılıkları, sürdürülen faaliyetler öncesi vergi karı veya zararı, net dönem karı veya zararı kalemlerinin tutarları ve ayrıca gayri safi yurtiçi hasıla ile enflasyon oranları makro değişkenler olarak modelde yer almaktadır. Elde edilen bulgulara göre, seçilmiş bankaların kredi kayıp karşılıkları üzerinde; kredi kayıp karşılıklarının kendi gecikmeli değeri, sürdürülen faaliyetler öncesi vergi karı veya zararı, sorunlu krediler ve aktif büyüklüğü istatistiksel olarak pozitif ve anlamlı, sermaye yeterlilik oranı ve ekonomik büyüme oranı ise negatif ve anlamlı bir etkiye sahiptir. Kredi kayıp karşılıkları üzerinde; dönem karı veya zararı, kredi-mevduat oranı ve enflasyon oranı değişkenleri ise istatistiksel olarak anlamlı bir etkiye sahip değildir.

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Loan Loss Provisions and Earnings Management in Malaysian Banking Industry

Cited by 3 publications

References 20 publications

Bank capital, earnings smoothing and provisioning practices in Nigeria: IFRS and risk evidence

Bank capital, earnings smoothing and provisioning practices in Nigeria: IFRS and risk evidence

Managerial discretions and loan loss provisions in Nigerian banks

Türk Bankacılık Sektöründe Kar Yönetimi Uygulamaları: Borsa İstanbul Örneği

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