Hands in the cookie jar: Exploiting loan loss provisions under bank financial distress

Malek El Diri, Timothy King, Laima Spokeviciute and Jonathan Williams

Economics Letters, 2021, vol. 209, issue C

Abstract: We investigate earnings management (EM) behaviour at failed banks by examining the intensity and direction of EM around FDIC-insured commercial bank failures. Our empirical analysis indicates that failing banks engage in EM to a significantly greater extent than non-failing banks. Our results show that failing banks’ discretion over loan loss provisions ranges from aggressive (upwards EM) to conservative (downwards EM).

Keywords: Earnings management; Bank failures; Banks (search for similar items in EconPapers)
JEL-codes: G21 G33 M41 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:209:y:2021:i:c:s016517652100375x

DOI: 10.1016/j.econlet.2021.110098

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