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Bank income smoothing, ownership concentration and the regulatory environment

Strobel, Frank and Bouvatier, Vincent and Lepetit, Laetitia (2014) Bank income smoothing, ownership concentration and the regulatory environment. Journal of Banking & Finance, 41 (1). pp. 253-270. ISSN 0378-4266 (In Press)

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URL of Published Version: http://dx.doi.org/10.1016/j.jbankfin.2013.12.001

Identification Number/DOI: 10.1016/j.jbankfin.2013.12.001

We empirically examine whether the way a bank might use loan loss provisions to smooth its income is influenced by its ownership concentration and the regulatory environment. Using a panel of European commercial banks, we .find evidence that banks with more concentrated ownership use discretionary loan loss provisions to smooth their income. This behavior is less pronounced in countries with stronger supervisory regimes or higher external audit quality. Banks with low levels of ownership concentration do not display such discretionary in- come smoothing behavior. This suggests the need to improve existing or implement new corporate governance mechanisms.

Type of Work:Article
Date:April 2014 (Publication)
School/Faculty:Colleges (2008 onwards) > College of Arts & Law
Department:Department of Economics
Keywords:income smoothing; loan loss provisions; ownership concentration, regulatory environment
Subjects:HG Finance
Institution:University of Birmingham
Copyright Holders:Elsevier
ID Code:1457
Refereed:YES
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