European bank loan loss provisioning and technological innovative progress

Simper, Richard; Dadoukis, Aristeidis; Bryce, Cormac

doi:10.1016/j.irfa.2019.03.001

Cited by 13 publications

(22 citation statements)

References 65 publications

(113 reference statements)

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“…Managers can transform earnings between years to make earnings smoothing over LLPs. This result is consistent with a previous study (Simper et al. , 2019; Kanagaretnam et al.…”

Section: Resultssupporting

confidence: 94%

Earnings quality determinants in pre-corona crisis: another insight from bank core capital categories

Valdiansyah

Murwaningsari

2022

AJAR

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PurposeDiscretionary accruals are earnings quality proxies that illustrate that the greater the value of discretionary accruals, the greater the practice of earnings management and vice versa. High-quality financial reports (especially earnings quality) are expected to help investors and potential investors to make decisions. This study analyses the factors that affect earnings quality, such as pre-managed earnings, liquidity and efficiency. Furthermore, the authors identify the moderating effect of the governance mechanisms proxied by the proportion of independent commissioners in conventional commercial banks listed on the Indonesia Stock Exchange.Design/methodology/approachThis study uses 226 banking data in the pre-corona crisis period 2013 until 2019. The data were analyzed using EViews 10 for hypothesis and MS Excel for a differential test.FindingsThe results show that pre-managed earnings, liquidity and efficiency affect earnings quality. The governance mechanisms can moderate liquidity and efficiency on earnings quality, while pre-managed earnings cannot be moderated. The different bank categories (BUKU) of earnings management mechanisms are shown for each BUKU (BUKU 1, 3 and 4 perform earnings management by increasing earnings, BUKU 2 lowering earnings). Another thing is information on the earnings quality between BUKU 2 with BUKU 3 and BUKU 4 because of differences in capital and bank operating coverage regulations.Research limitations/implicationsFurther research expects to analyze the factors affecting banking earnings quality concerning applying IFRS 9 (PSAK 71) in Indonesia. Future researchers expect to apply mixed methods to verify the financial statement data and provide comprehensive discussion and genuine insight from their study. Future research requires more samples from companies or an international scale (cross country) to obtain maximum results and be generally accepted.Practical implicationsThis study implies that managers should have more control over pre-managed earnings and bank liquidity as manager's incentive to do earnings smoothing. Managers should also pay attention to cost-efficiency and effective implementation of governance mechanisms to maximize earnings quality. This study also implies that policymakers can encourage commercial banks to apply more prudential principles in terms of a reserve for failed loans to minimize earnings management in banking.Originality/valueThe significance of this study revealed in the discussion of the difference test between bank core capital categories (BUKU) and its relation to earnings quality.

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“…Managers can transform earnings between years to make earnings smoothing over LLPs. This result is consistent with a previous study (Simper et al. , 2019; Kanagaretnam et al.…”

Section: Resultssupporting

confidence: 94%

Earnings quality determinants in pre-corona crisis: another insight from bank core capital categories

Valdiansyah

Murwaningsari

2022

AJAR

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“…A negative coefficient on loans growth rate is also in line with previous evidence (Balla and Rose, 2015; Marton and Runesson, 2017; Olszak et al. , 2018; Simper et al. , 2019).…”

Section: Resultssupporting

confidence: 91%

“…Loans-growth rate (Loans Growth) measures the link between LLP and expected loan losses (Laeven and Majnoni, 2003; Olszak et al. , 2017, 2018; Meriläinen, 2019; Simper et al. , 2019; Skała, 2020; Danisman et al.…”

Section: Methods and Datamentioning

confidence: 99%

“…, 2018) and negative coefficients (Olszak et al. , 2017; Meriläinen, 2019; Simper et al. , 2019; Skała, 2020; Di Fabio et al.…”

Section: Methods and Datamentioning

confidence: 99%

“…Bikker and Metzemakers, 2005; Fonseca and González, 2008; Olszak et al. , 2017, 2018; Meriläinen, 2019; Simper et al. , 2019; Skała, 2020; Danisman et al.…”

Section: Methods and Datamentioning

confidence: 99%

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Procyclicality of loan-loss provisions and competitive environment – a global perspective

Olszak

Kowalska

2022

IJOEM

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PurposeDespite the extensive debate on the impact of bank competition on risk-taking, there is no evidence of its role in procyclicality of loan-loss provisions (LLPs). The purpose of this study is to find out what is the role of competition in the procyclicality of LLPs.Design/methodology/approachUsing over 70,000 bank-level observations in 103 countries in 2004–2015 and the LLPs model, this study interacts competition with business cycle to check what is the effect of competition on procyclicality of LLPs.FindingsThis study finds that intense competition is associated with more procyclicality of LLPs. Increased procyclicality of LLPs in a more competitive environment is binding for high-income countries. The opposite effect is shown for low-income countries.Research limitations/implicationsFuture research can be extended by testing the role of additional factors – such as regulations, supervision or institutional protection of shareholders' rights, in the association between procyclicality and competition.Practical implicationsThe main message of this paper is that the competitive environment changes the procyclicality of LLPs. The results are important from the point of view of the COVID-19 pandemic because government interventions during lockdowns will affect competition in the banking industry and in other industries of the economy.Originality/valueThis paper contributes to the extant research in three dimensions. First, it shows that competition is an important factor behind procyclicality of LLPs. Second, it adds to the research on the links between competition and financial stability. Third, it shows that the link between competition and procyclicality of LLPs depends on the economic development of the country in which the banks are located.

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The Role of IT Investment on the Bank Performance: A Cointegration and Causality Analysis for Asian Countries

Dınçer

Yüksel

2020

Role of IT- ITES in Economic Development of Asia

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European bank loan loss provisioning and technological innovative progress

Cited by 13 publications

References 65 publications

Earnings quality determinants in pre-corona crisis: another insight from bank core capital categories

Earnings quality determinants in pre-corona crisis: another insight from bank core capital categories

Procyclicality of loan-loss provisions and competitive environment – a global perspective

The Role of IT Investment on the Bank Performance: A Cointegration and Causality Analysis for Asian Countries

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