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Bank Income Smoothing, Institutions and Corruption

Peterson K Ozili

MPRA Paper from University Library of Munich, Germany

Abstract: This study investigates bank income smoothing, focusing on the effect of corruption on the extent of income smoothing by African banks. I find that banks use loan loss provisions to smooth positive (non-negative) earnings particularly in the post-2008 crisis period and this behaviour is reduced by strong investor protection. Also, I find that banks in highly corrupt environments smooth their positive (non-negative) earnings as opposed to smoothing the entire profit distribution. Finally, cross-country variation in bank income smoothing is observed. The findings have implications.

Keywords: Loan loss provisions; Earnings Management; Investor Protection; Corruption; Income Smoothing; Bank; Profitability (search for similar items in EconPapers)
JEL-codes: G21 G28 M48 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban
Date: 2019
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Handle: RePEc:pra:mprapa:92339