Hands in the cookie jar: Exploiting loan loss provisions under bank financial distress

Malek El Diri; Timothy King; Laima Spokeviciute; Jonathan Williams

doi:10.1016/j.econlet.2021.110098

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Hands in the cookie jar: Exploiting loan loss provisions under bank financial distress

Malek El Diri, Timothy King, Laima Spokeviciute and Jonathan Williams

Economics letters, Vol.209, 110098

12/2021

DOI: https://doi.org/10.1016/j.econlet.2021.110098

Abstract

Bank failures

Banks

Earnings management

We investigate earnings management (EM) behaviour at failed banks by examining the intensity and direction of EM around FDIC-insured commercial bank failures. Our empirical analysis indicates that failing banks engage in EM to a significantly greater extent than non-failing banks. Our results show that failing banks’ discretion over loan loss provisions ranges from aggressive (upwards EM) to conservative (downwards EM).

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Title: Hands in the cookie jar: Exploiting loan loss provisions under bank financial distress
Creators: Malek El Diri - Leeds University Business School, University of Leeds, Leeds LS2 9JT, UK
Timothy King - Kent Business School, University of Kent, Kent, CT2 7FS, UK
Laima Spokeviciute - Cardiff University Business School, Cardiff University, Cardiff, CF10 3EU, UK
Jonathan Williams
Publication Details: Economics letters, Vol.209, 110098
Publisher: Elsevier
First online publication date: 06/10/2021
Publication Date: 12/2021
Date accepted for publication: 01/10/2021
Identifiers: 99704965302346; WOS:000710476700010
Academic Unit: Surrey Business School
Language: English
Resource Type: Journal article

Hands in the cookie jar: Exploiting loan loss provisions under bank financial distress

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