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2021 | OriginalPaper | Buchkapitel

1. Introduction

verfasst von : Costanza Di Fabio

Erschienen in: National Supervision and Income Smoothing in Banks’ Annual Reports

Verlag: Springer International Publishing

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Abstract

This book tackles the debated relationship between the characteristics of national supervisory systems and manipulative practices in banks’ annual reports, with a specific focus on income smoothing. Since the 2008 financial crisis, governmental bodies and regulators have stressed the crucial role of supervision for bank transparency purposes, but the effects of supervision on accounting manipulation are still discussed.

The volume investigates whether the characteristics of national supervision affect bank propensity to smooth income. It also considers the potential role of bank business model, as recent research suggests its influence on banks’ accounting manipulations.

The empirical analysis employs a single rich dataset including data from financial statements of European banks from 2003 to 2015, country-level variables for the supervisory style, and data from the Asset Quality Review conducted by the European Central Bank. Overall, the evidence provided enables comparison between the effects of different supervisory features and gaining a broad understanding of the phenomenon.

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Nächstes Kapitel After the Crisis: New Approaches in Accounting Standards Applied by Banks and the New Framework for Banking Supervision

This book specifically focusses on banks’ annual reports and accounting discretion in the banking industry. However, it is worth recalling here a rich literature not specifically focussing on financial firms and discussing transparency of accounting and disclosure practices. The debate spams from discretion in firms’ accounting choices (Lai & Stacchezzini, 2009; Quagli & Avallone, 2010; Avallone et al., 2015; Avallone & Quagli, 2015; Greco, 2015; Leoni & Florio, 2015; Marchini et al., 2018) to discretion in disclosure (Bini et al., 2010; Dainelli et al., 2013; Marchini et al., 2019), and flourished as a consequence of the introduction of the International Financial Reporting Standards (IFRS) in the European context (Pizzo, 2000; Giunta, 2003; Lionzo, 2005; Andrei, 2006; Cordazzo, 2008; Quagli, 2009; Corbella & Florio, 2010; Azzali et al., 2011; Florio, 2011; Pavan & Paglietti, 2011; Marchi & Potito, 2012; Corbella et al., 2013; Teodori & Veneziani, 2013; Moscariello et al., 2014), also due to complexity and subjectivity in interpreting and applying principle-based standards as well as in enforcing them (Quagli & Ramassa, 2018a; Quagli et al., 2020, 2021; Ramassa, 2020).

The combination of different features of the national supervisory system has been referred to by Carretta et al. (2015) as ‘supervisory style’.

With specific reference to this research setting, studies support bank opacity, and remark the relevance of the opportunistic perspective to explain bank accounting choices (Morgan, 2002; Flannery et al., 2004; Andreou et al., 2017).

The book employs loan loss provisions in line with other studies on banks’ earnings management. Indeed, loan loss provisions have thus far been widely explored by a rich literature focussing on the banking industry (see also Wahlen, 1994; Liu & Ryan, 1995; Kim & Kross, 1998; Kanagaretnam et al., 2003, 2004; Fonseca & González, 2008; Gebhardt & Novotny-Farkas, 2011; Jin et al., 2018; García-Osma et al., 2019). As noted by Curcio et al. (2017), accounting research usually distinguishes between a non-discretionary component of loan loss provisions and the discretionary one, whereas the practice considers specific and general provisions.

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Titel: Introduction
verfasst von: Costanza Di Fabio
Verlag: Springer International Publishing
Buch: National Supervision and Income Smoothing in Banks’ Annual Reports
Print ISBN: 978-3-030-74010-8

Electronic ISBN: 978-3-030-74011-5

Copyright-Jahr: 2021
DOI: https://doi.org/10.1007/978-3-030-74011-5_1