Big 4 auditors, bank earnings management and financial crisis in Africa

Peterson Kitakogelu Ozili

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines whether African banks audited by a Big 4 auditor use loan loss provisions for earnings management purposes before, during and after the global financial crisis. It focuses on income smoothing as a type of earnings management. Using bank data from 21 African countries from 2002 to 2014, the results show that African banks audited by a Big 4 auditor use loan loss provisions to smooth income and the incentive to smooth income is greater during recessionary periods. Also, African banks audited by a Big 4 auditor use income smoothing to lower high earnings during the financial crisis and in the pre-financial crisis period but not in the post-financial crisis period.

Keywords: Loan loss provision; banks; audit quality; Big 4 auditor; income smoothing; financial crisis; earnings management; economic cycles; recession; earnings smoothing (search for similar items in EconPapers)
JEL-codes: G20 G21 G28 M00 M40 M41 M42 M48 M49 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-acc, nep-ban and nep-fdg
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:108608

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