Do more foreign strategic investors and more directors improve the earnings smoothing? The case of China
Chung-Hua Shen and
International Review of Economics & Finance, 2015, vol. 36, issue C, 3-16
Since 2004, Chinese government requests the local banks to invite foreign financial institutions to be one or more of the large shareholders in the local banks. These foreign financial institutions are commonly referred to as the foreign strategic investors (FSIs), whose aim is to improve the performance and governance of the local banks. This study investigates whether FSIs can influence the earnings smoothing (ES) of local Chinese banks, which is dubbed as the “FSI effect.” If such effect is observed, we examine whether the transmission is achieved through the “accounting quality channel” (i.e., more FSIs reduce Chinese banks' ES) or the “safety and soundness channel” (i.e., more FSIs strengthen these banks' ES). We use data from 102 local banks from 2006 to 2011 to examine the FSI effect and the two channels by considering banks with zero, one, and two FSIs. Our results support the safety and soundness channel, indicating that more FSIs enhance ES and a stronger FSI effect for banks with more FSIs and more FSI directors.
Keywords: Foreign strategic investors; Income smoothing; Loan loss provisions; Chinese banks (search for similar items in EconPapers)
JEL-codes: C23 G14 M41 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:36:y:2015:i:c:p:3-16
Access Statistics for this article
International Review of Economics & Finance is currently edited by H. Beladi and C. Chen
More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Haili He ().