 State-controlled banks and income smoothing. Do politics matter?Anh-Tuan Doan, Kun-Li Lin and Shuh-Chyi Doong The North American Journal of Economics and Finance, 2020, vol. 51, issue C Abstract: This paper uses a new dataset to reassess the relationship between government ownership and income smoothing of commercial banks. We also evaluate how political connections affect the impact of government ownership on earnings management. We find that banks with more state-controlled shareholders located in developing countries tend to have more incentives to smooth income. The paper finds no significant difference in earnings manipulation between government-controlled and non-government banks in developed countries. Next, to investigate whether the income smoothing behavior of state-controlled banks is driven by political objectives, the paper tests whether this behavior widens during national election years; the results provide strong support for this conjecture. The magnitude of the income smoothing behavior also varies with different countries and electoral characteristics. These findings suggest that the political channel plays an important role in determining the income smoothing incentives of state-controlled banks, especially in developing countries. Keywords: Government ownership; Income smoothing; Politics; Banking (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:51:y:2020:i:c:s1062940818302249 DOI: 10.1016/j.najef.2019.101057 Access Statistics for this article The North American Journal of Economics and Finance is currently edited by Hamid Beladi More articles in The North American Journal of Economics and Finance from Elsevier |
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