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Is accounting enforcement related to risk-taking in the banking industry?

Lorenzo Dal Maso, Kiridaran Kanagaretnam, Gerald J. Lobo and Francesco Mazzi

Journal of Financial Stability, 2020, vol. 49, issue C

Abstract: Using a sample of banks from 36 countries, we document that accounting enforcement is negatively related to bank risk-taking. We also provide evidence that accounting enforcement enhances bank stability during the crisis. In addition, we show that banks assume less risk through more conservative lending decisions and a reduction in complexity in jurisdictions with higher accounting enforcement. Our results show that formal institutions such as accounting enforcement are associated with bank financial decisions and risk-taking behavior.

Keywords: Accounting Enforcement; Bank Risk-taking; Bank Complexity; Bank Reporting Discretion (search for similar items in EconPapers)
JEL-codes: G21 G28 M41 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.jfs.2020.100758

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