Managing specific accruals vs. structuring transactions: Evidence from banking industry

Cheng, Xiaoyan

doi:10.1016/j.adiac.2012.02.001

Cited by 5 publications

(9 citation statements)

References 46 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…The error term of the regression Equation (3) is termed as DRSGL (Beatty et al, 2002; Bratten et al, 2017; Cheng, 2012; Cohen et al, 2014; Cornett et al, 2009; Grougiou et al, 2014; Kumari & Pattanayak, 2017)…”

Section: Methodsmentioning

confidence: 99%

“…Some studies reported that earnings can be managed through changing the time of security gains and losses (Beatty et al, 1995;Beatty & Harris, 1998;Collins et al, 1995). Yet another chunk of literature uses both LLP and security gains and losses in combination (Beatty et al, 2002;Bratten et al, 2017;Cheng, 2012;Cohen et al, 2014;Cornett et al, 2009;Grougiou et al, 2014;Kumari & Pattanayak, 2017) to measure EM. Beatty et al (2002) developed a bank-specific model to measure EM using LLP and realized security gains and losses (RSGL) in combination and found that in order to avoid small earnings decreases public banks are more prone to use DLLP and discretionary realized security gains and losses (DRSGL) than private banks.…”

Section: Review Of Literaturementioning

confidence: 99%

“…To estimate DLLP data are pooled across all years. The modified version of model can be described as: The fitted value in above regression Equation ( 1) imitate normal loan losses as per the loan portfolio composition and the error term is treated as abnormal or DLLP (Beatty et al, 2002;Bratten et al, 2017;Cheng, 2012;Cohen et al, 2014;Cornett et al, 2009;Grougiou et al, 2014).…”

Section: Measurement Of Earnings Managementmentioning

confidence: 99%

“…Here, TA refers to total assets and TL refers to total loans. The error term of the regression Equation ( 3) is termed as DRSGL (Beatty et al, 2002;Bratten et al, 2017;Cheng, 2012;Cohen et al, 2014;Cornett et al, 2009;Grougiou et al, 2014 The standard deviation of NPL and LOSS are 3.421% and 2.511% indicates that the level of bad loans and their provision are largely dispersed between banks. LLR is between 0.069% and 23.973% with a standard deviation of 3.695%.…”

Section: Measurement Of Earnings Managementmentioning

confidence: 99%

Section: Review Of Literaturementioning

confidence: 99%

See 4 more Smart Citations

Quality of Reported Earnings: An Empirical Study of Indian Banking Industry

Mangala

Singla

2021

Vision: The Journal of Business Perspective

View full text Add to dashboard Cite

Earnings management (EM) practices by bank managers can prove to be very precarious in smooth running of the financial system of a country. The failure of financial system shocks the entire economy. The present paper aims to assess the quality of earnings in the Indian banking industry. EM is estimated by employing a bank-specific model that measures EM through loan loss provision (LLP) and realized security gains and losses (RSGL). The findings exhibit that public banks practice income increasing and private banks practice income decreasing EM, whereas, combined result reinforces the practice of income decreasing EM. The results indicate that public sector banks use both LLP and RSGL to manage earnings whereas private sector banks increasingly rely on RSGL. Further, direction of EM is gauged by classifying EM on the basis of quartiles. This study has implication for regulators, investor and depositors. Regulators should be stricter regarding policies of LLP. Apart from earnings, investor and depositors should be considered other measures of stability of banks like capital adequacy ratio because earnings may be manipulated.

show abstract

Section: Methodsmentioning

confidence: 99%

Section: Review Of Literaturementioning

confidence: 99%

Section: Measurement Of Earnings Managementmentioning

confidence: 99%

Section: Measurement Of Earnings Managementmentioning

confidence: 99%

Section: Review Of Literaturementioning

confidence: 99%

See 3 more Smart Citations

Quality of Reported Earnings: An Empirical Study of Indian Banking Industry

Mangala

Singla

2021

Vision: The Journal of Business Perspective

View full text Add to dashboard Cite

show abstract

The Recognition of Provisions: Evidence from BIST100 Non-financial Companies

Suer

2014

Procedia Economics and Finance

View full text Add to dashboard Cite

Impact of Earnings Management on Profitability of Commercial Banks: Evidence from India

Mangala

Singla

2022

FIIB Business Review

View full text Add to dashboard Cite

This article assesses the impact of earnings management on bank’s current and future financial performance. A bank-specific model, invented by Beatty et al. (2002, Accounting Review, vol. 77, pp. 547–570) and modified by Mangala and Singla (2021; Vision: The Journal of Business Perspective, vol. 25, pp. 159–167), is applied to measure earnings management. Cross-sectional regression is applied to analyse the impact of earnings management on the financial performance of banks for a time period of 7 years (from 2012–2013 to 2018–2019.). The results exhibit that Indian banks actively manage earnings. Earnings management reduces current year’s return on equity, return on assets and net interest margin. Current year’s earnings management also negatively influences following 2 years’ return on equity and net interest margin. Thus, earnings management has major negative implications on banks’ financial performance, not only in the year of earnings management but also in the years to come. In order to curtail earnings management, while examining the financial statements, auditors should be vigilant, and the Reserve Bank of India (the apex regulator) should take punitive actions against such malpractices.

show abstract

Managing specific accruals vs. structuring transactions: Evidence from banking industry

Cited by 5 publications

References 46 publications

Quality of Reported Earnings: An Empirical Study of Indian Banking Industry

Quality of Reported Earnings: An Empirical Study of Indian Banking Industry

The Recognition of Provisions: Evidence from BIST100 Non-financial Companies

Impact of Earnings Management on Profitability of Commercial Banks: Evidence from India

Contact Info

Product

Resources

About