Determinants of bank income smoothing using loan loss provisions in the United Kingdom

Peterson Ozili

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the determinants of bank income smoothing using loan loss provisions in the United Kingdom from 1999 to 2017. The findings show that UK banks use loan loss provisions for income smoothing purposes. Income smoothing is greater in times of high economic policy uncertainty. The extent of bank income smoothing is reduced by foreign bank presence, UK GAAP adoption, IFRS9 adoption, and high levels of voice and accountability. Also, there is reduced income smoothing using loan loss provisions during a financial crisis and in periods of economic prosperity. The implication is that economic conditions, institutional governance and accounting disclosure rules influence the extent of bank income smoothing in the United Kingdom. The findings of the study contribute to several studies that explore the determinants of bank income smoothing in a single country context.

Keywords: banks; earnings management; United Kingdom; loan loss provisions; income smoothing; economic policy uncertainty; Great Britain; accounting disclosure; financial crisis. (search for similar items in EconPapers)
JEL-codes: G21 G28 M0 M41 M42 M48 M49 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-acc, nep-ban and nep-eec
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Journal Article: Determinants of bank income smoothing using loan loss provisions in the United Kingdom (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:112047

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