Is accounting enforcement related to risk-taking in the banking industry?

Using a sample of banks from 36 countries, we document that accounting enforcement is negatively related to bank risk-taking. We also provide evidence that accounting enforcement enhances bank stability during the crisis. In addition, we show that banks assume less risk through more conservative lending decisions and a reduction in complexity in jurisdictions with higher accounting enforcement. Our results show that formal institutions such as accounting enforcement are associated with bank financial decisions and risk-taking behavior

Applying Benford’s law to detect accounting data manipulation in the banking industry

We utilise Benford’s Law to test if balance sheet and income statement data broadly used to assess bank soundness were manipulated prior to and also during the global financial crisis. We find that all banks resort to loan loss provisions to manipulate earnings and income upwards. Distressed institutions that have stronger incentives to conceal their financial difficulties resort additionally to manipulating loan loss allowances and non-performing loans downwards. Moreover, manipulation is magnified during the crisis and expands to encompass regulatory capital

An international forensic perspective of the determinants of bank CDS spreads

In this paper, we provide a forensic perspective of the determinants of banks' CDS spreads. Using data for 118 banks of 30 countries over the period 2004-2011, we find that banks' default risk typically reflects: (i) the quality of the banks’ balance sheet; (ii) liquidity of banks’ assets; (iii) how profitable banks’ operations are; (iv) the banks’ leverage ratios; and (v) how stringent/lenient regulatory capital ratios are. Considering a series of indicators of the financial structure of the banking system, our results reveal that: (i) higher concentration of the banking sector, stronger presence of foreign banks and a deterioration of the health of the banking sector lead to higher banks' CDS spreads; and (ii) the availability of alternative means of finance does not significantly influence banks' default risk. We also show that periods of high inflation, low GDP growth and stock market crashes are prone to an intensification of tensions in the banking system, but financial reforms (especially, in the field of banking supervision and privatizations) can mitigate them. Moreover, the timing, the duration and the composition of fiscal consolidation programs have a significant impact on banks' CDS spreads, and, in particular, expenditure-driven consolidation episodes are associated with a rise in banks' default risk. Finally, we highlight that although the financial crisis of 2008-2009 was a global event, higher quality of economic and legal institutions (and, therefore, in the regulatory framework) could have dampened the rise in bank' CDS spreads

An Empirical Analysis on Board Monitoring Role and Loan Portfolio Quality Measurement in Banks

This paper aims to analyze the effectiveness of the board monitoring role on specific loan portfolio quality measures in banks (default rate, recovery rate and provisioning rate). We use a sample comprises a totality of Italian-based banks, listed at Borsa Italiana SpA in 2006-2008 and a number of accounting proxies to express the loan portfolio quality of a bank. The results of the analysis show an overall weakness of the board role (expressed by Independents and Audit Committee on board) in monitoring loan portfolio quality of the bank, with the subsequent damage of the interests of stakeholders. A positive contribution of board monitoring, even if partial, is highlighted in two cases: Independents seems improve recovery rate, while the Audit committee enhances provisioning rate in banks. With reference to default rate, a total negative effect of board monitoring is reported. On the base of these results, some managerial implications are proposed

Home and foreign host country IFRS adoption and cross-delisting

202009 bcrcAccepted ManuscriptPublishe

Cross-country evidence on the relationship between societal trust and risk-taking by banks

202208 bcfcVersion of RecordOthersSocial Sciences and Humanities Research Council of Canada (SSHRC)Publishe