Risk-Adjusted Performance of European Banks Under the Basel Accord

Ford, Guy; Weston, Rae

doi:10.2139/ssrn.394984

Cited by 4 publications

(4 citation statements)

References 14 publications

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“…Hence, we would expect more aggressive earnings management in the post‐Basel period. Evidence of this behaviour has been witnessed in Organization for Economic Cooperation and Development countries (Ford and Weston, 2003) and in Asian countries (Delhaise, 1998), but not in the USA for either period (Ahmed et al ., 1999). Ahmed et al .…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Use of loan loss provisions for capital, earnings management and signalling by Australian banks

Anandarajan

Hasan

McCarthy

2007

Accounting & Finance

180

228

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This study examines whether and to what extent Australian banks use loan loss provisions (LLPs) for capital, earnings management and signalling. We examine if there were changes in the use of LLPs as a result of the implementation of banking regulations consistent with the Basel Accord of 1988, which made loan loss reserves no longer part of Tier I capital in the numerator of the capital adequacy ratio. We find some evidence to indicate that Australian banks use LLPs for capital management, but we find no evidence of a change in this behaviour after the implementation of the Basel Accord. Our results indicate that banks in Australia use LLPs to manage earnings. Furthermore, listed commercial banks engage more aggressively in earnings management using LLPs than unlisted commercial banks. We also find that earnings management behaviour is more pronounced in the post-Basel period. Overall, we find a significant understating of LLPs in the post-Basel period relative to the pre-Basel period. This indicates that reported earnings might not reflect the true economic reality underlying those numbers. Finally, Australian banks do not appear to use LLPs for signalling future intentions of higher earnings to investors. Copyright (c) The Authors Journal compilation (c) 2007 AFAANZ.

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Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Use of loan loss provisions for capital, earnings management and signalling by Australian banks

Anandarajan

Hasan

McCarthy

2007

Accounting & Finance

180

228

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“…Charges against earnings for the period in which they are recorded are represented by a loan loss provision. Increases in loan loss provisions in response to deterioration in loan quality diminish banks' retained earnings, and weaker institutions are under pressure to reduce loan loss provisions (Ford & Weston,[11]).…”

Section: Loan Loss Provisionsmentioning

confidence: 99%

The Impact of Credit Risk on the Value of Shareholders of Listed Banks in Nigeria

Bala¹,

Auwal²,

Salisu³

2022

IJAFRM

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Credit risk is the weightiest menace that banks encountered during their operations. Various banking crises have prompted banks to focus more on credit risk management activities, as it is critical for banks to maximize the wealth of their shareholders. The primary goal of businesses is to maximize shareholder wealth, as such DMBs are expected to engage in risk management operations if and only if it adds value to both the firm and the shareholders. Thus, this study seeks to establish the influence of credit risks on the profitability of listed Nigerian DMBs. The ex-post facto method was adopted and the researchers sampled eight (8) out of twenty-four (24) quoted DMBs on the Nigerian Group Exchange. Data was sourced from the audited annual accounts of the sampled DMBs for a period of four years, spanning from 2015-2019. OLS regression techniques revealed that non-performing loans (NPL) have an insignificant influence on the profitability of the sampled DMBs (=-0.141; p, 0.797). This implies that a 1% increase in NPL would lead to a 14% decrease in shareholders' value. Loan and advances (LAD) according to the regression models exert a significant influence on shareholders' value (=7.341; p, 0.004). This implies that an increase in LAD will leads to an increase in the shareholders' value. Nigerian banks should keep their loan and advance portfolios because it makes them more valuable to their shareholders.

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“…Ford and Weston (2003) examine the performance of banks in Belgium, Denmark, Germany, Ireland, Italy, the Netherlands, Scandinavia, Switzerland and the UK over the 1980–1996 period. They find that following the introduction of Basel I, the volatility of bank equity returns decreased across most European countries, except Belgium and Scandinavia.…”

Section: Survey Of the Literaturementioning

confidence: 99%

“…Prior to the implementation of Basel I, banks in Belgium and Scandinavia had the highest risk‐adjusted returns, suggesting that these banks were undercapitalized relative to their risk exposure in the pre‐Basel period. Despite the standardized capital requirements of Basel I, however, Ford and Weston (2003) find considerable differences in the risk/return performance across countries. They claim that capital levels appear to be driven by assessments of economic risk, rather than by capital regulations.…”

Section: Survey Of the Literaturementioning

confidence: 99%

The Basel Capital Accords and International Mortgage Markets: A Survey of the Literature

Allen¹

2004

Financial Market

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Risk-Adjusted Performance of European Banks Under the Basel Accord

Cited by 4 publications

References 14 publications

Use of loan loss provisions for capital, earnings management and signalling by Australian banks

Use of loan loss provisions for capital, earnings management and signalling by Australian banks

The Impact of Credit Risk on the Value of Shareholders of Listed Banks in Nigeria

The Basel Capital Accords and International Mortgage Markets: A Survey of the Literature

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