Bank income smoothing, ownership concentration and the regulatory environment

Vincent Bouvatier, Laetitia Lepetit and Frank Strobel

Journal of Banking & Finance, 2014, vol. 41, issue C, 253-270

Abstract: We empirically examine whether the way a bank might use loan loss provisions to smooth its income is influenced by its ownership concentration and the regulatory environment. Using a panel of European commercial banks, we find evidence that banks with more concentrated ownership use discretionary loan loss provisions to smooth their income. This behavior is less pronounced in countries with stronger supervisory regimes or higher external audit quality. Banks with low levels of ownership concentration do not display such discretionary income smoothing behavior. This suggests the need to improve existing or implement new corporate governance mechanisms.

Keywords: Income smoothing; Loan loss provisions; Ownership concentration; Regulatory environment (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (80)

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Working Paper: Bank Income Smoothing, Ownership Concentration and the Regulatory Environment (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:41:y:2014:i:c:p:253-270

DOI: 10.1016/j.jbankfin.2013.12.001

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