Managing Financial Reports of Commercial Banks: The Influence of Taxes, Regulatory Capital, and Earnings

Beatty, Anne; Chamberlain, Sandra; Magliolo, Joseph

doi:10.2307/2491487

Cited by 642 publications

(491 citation statements)

References 7 publications

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“…While this expected feature of second-best standards is one explanation for the criticism of FVA during the crisis, it is clearly also possible that extant rules and guidance are too restrictive 15 See, e.g., Beatty et al (1995), Ball et al (2000), Ramanna and Watts (2007) and Disclosure Insight (2009). Indirect evidence is also provided by the observation that "the reported book values of assets at failed banks often overstate economic value (see General Accounting Office, 1990)."…”

Section: Are There Implementation Problems With Fair-value Accountingmentioning

confidence: 99%

The crisis of fair-value accounting: Making sense of the recent debate

Laux

Leuz

2009

Accounting, Organizations and Society

590

310

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Section: Are There Implementation Problems With Fair-value Accountingmentioning

confidence: 99%

The crisis of fair-value accounting: Making sense of the recent debate

Laux

Leuz

2009

Accounting, Organizations and Society

590

310

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“…Therefore, based on Models (1) and (2), we conduct the "omitted variables" version of the Hausman [1978] test of endogeneity between RDX and DEDICATED (see Beatty et al [1995]). Unreported results suggest that RDX and DEDICATED are indeed endogenously determined.…”

Section: Two-stage Regression Controlling For Endogeneitymentioning

confidence: 99%

Earnings Guidance and Managerial Myopia

Cheng

Subramanyam

2005

SSRN Journal

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“…Prior studies of earnings management in the banking industry have considered historical earnings as a target rather than the consensus analyst forecast (Beatty, Chamberlain, and Magliolo 1995;Collins, Shackelford, and Wahlen 1995). Management may use its discretion to beat historical earnings or to reduce the time-series volatility of earnings (i.e., income smoothing).…”

Section: Tests Of Earnings Management After the Adoption Datementioning

confidence: 99%

“…However, banks can also use other discretionary accruals, such as loan loss provisions, to manage earnings (Beatty et al 1995;Collins et al 1995). This specification issue biases against finding a significant association between deviations from the target and ∆VA.…”

Section: Car Vol 20 No 3 (Fall 2003)mentioning

confidence: 99%

Earnings Management Using the Valuation Allowance for Deferred Tax Assets under SFAS No. 109*

Schrand

Wong

2003

Contemporary Accting Res

201

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Statement of Financial Accounting Standards No. 109 ( SFAS No. 109 ) allows firms to use their discretion to set arbitrarily high valuation allowances against deferred tax assets. Firms can then later use these "hidden reserves" to manage earnings. Our evidence indicates that most banks do not record a valuation allowance to manage earnings, but rather to follow the guidelines of SFAS No. 109 . However, if the bank is sufficiently well capitalized to absorb the current-period impact on capital, then the amount of the valuation allowance increases with a bank's capital. In later years, bank managers adjust the valuation allowance to smooth earnings. The magnitude of the discretionary adjustment increases with the deviation of unadjusted earnings from the forecast or historical earnings. Keywords Banks; Deferred taxes; Discretion; Earnings management CondenséLes auteurs se demandent si les banques gèrent le bénéfice en constituant une provision pour moins-value élevée à l'égard des actifs d'impôts futurs ( deferred tax assets -DTA ) et en ajustant cette provision dans les exercices ultérieurs. Le Statement of Financial Accounting Standards n o 109 (SFAS 109) exige que les entreprises créent des provisions pour moinsvalue à l'égard des actifs d'impôts futurs. Au cours des exercices ultérieurs, les ajustements qui sont apportés à ces provisions sont passés en résultat, à titre d'élément de la charge totale d'impôts sur les bénéfices. Dans le cadre du débat suscité par la nouvelle norme, les analystes ont supposé que les entreprises, lorsqu'elles adoptaient le SFAS 109, pouvaient surestimer la provision pour moins-value et la radier ultérieurement, à des fins stratégiques, de façon à augmenter le bénéfice des exercices ultérieurs.Les entreprises pouvaient donc « dissimuler » la provision pour moins-value lors de l'adoption du SFAS 109, car l'ajustement cumulatif compte non tenu de la provision pour moins-value excédait, en général, le montant de la provision. Cette provision était cependant suffisamment importante pour offrir aux entreprises la possibilité de manipuler le bénéfice futur. La provision moyenne pour moins-value des banques de l'échantillon est de 0,09 $ par action (0,37 $ pour les banques de l'échantillon ayant fait état de provisions pour moins-value différentes de zéro), par rapport à un bénéfice par action total déclaré de 1,99 $, en moyenne. L'analyse porte sur un échantillon de sociétés de portefeuille bancaires faisant appel public à l'épargne (ci-après banques ). Les banques indiquent des montant considérables au titre des actifs d'impôts futurs et ont donc la possibilité de constituer de substantielles provisions pour moins-value. Leurs activités d'exploitation sont aussi relativement homogènes et elles sont sensibles aux conditions macroéconomiques. Ces facteurs renforcent le modèle des ajustements non discrétionnaires à la provision pour moins-value que proposent les auteurs.L'analyse que font les auteurs des décisions prises par les banques, au moment où elles ont adopté le SFAS 109...

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Managing Financial Reports of Commercial Banks: The Influence of Taxes, Regulatory Capital, and Earnings

Cited by 642 publications

References 7 publications

The crisis of fair-value accounting: Making sense of the recent debate

The crisis of fair-value accounting: Making sense of the recent debate

Earnings Guidance and Managerial Myopia

Earnings Management Using the Valuation Allowance for Deferred Tax Assets under SFAS No. 109*

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