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2023 | Buch

Introduction Kapitel lesen Erstes Kapitel lesen

The Effect of Covid-19 on Loan Loss Provisions and Earnings Management of European Banks

verfasst von: Merjona Lamaj

Verlag: Springer Fachmedien Wiesbaden

Buchreihe : BestMasters

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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SUCHEN

Über dieses Buch

This book examines the effect of Covid-19 on loan loss provisions (LLPs) and earnings management of European banks. Specifically, the author analyzes how the high flexibility offered by prudential authorities and standard setters in the context of Covid-19 affects banks’ use of discretion when accounting for loan loss provisions. She finds that during Covid-19 banks use discretionary LLPs to a greater extent than before Covid-19. This trend is more evident for banks located in countries that have implemented strong containment measures as a response to the Covid-19 pandemic. Moreover, while banks tend to overstate LLPs at the beginning of the pandemic, they do, on average, understate them during 2021. Finally, examining the direction of earnings management the author finds that during Covid-19 banks use upward earnings management, whereas before Covid-19 they engage in downward earnings management.

Inhaltsverzeichnis

Frontmatter
Chapter 1. Introduction
Abstract
The Covid-19 pandemic, declared on 11 March 2020, poses a challenge in many respects. Adding to the severe health consequences and loss of human lives, the costs for the economy are unprecedented. Lock-down measures implemented by many governments in order to halt the spread of the virus have had a great effect on the economic activity.
Merjona Lamaj
Chapter 2. IFRS 9 and the Expected Credit Loss Model
Abstract
This chapter aims to describe the key requirements of IFRS 9 on accounting for loan loss provisions. First, it describes the main rationale behind credit loss provisioning. It proceeds by giving a short history of the standard development and finally, the last section summarizes the main implications of the ECL-model on banks’ loan loss provisioning practices.
Merjona Lamaj
Chapter 3. Covid-19 and European Banks
Abstract
This chapter outlines the main implications of the Covid-19 pandemic on banks’ loan loss provisions. It begins by giving a short overview of the Covid-19 pandemic and its main economic consequences. Furthermore, it summarizes the recommendations of prudential and regulatory authorities regarding banks’ loan loss provisionings in the context of Covid-19. Finally, the last section gives an overview of the loan loss provisioning practices evidenced by European supervisory institutions during the pandemic year.
Merjona Lamaj
Chapter 4. Hypothesis Development
Abstract
In this chapter I develop my main expectations with regard to the Covid-19 effect on banks’ earnings management practices. After explaining the main rationale behind earnings management, I give an overview of prior literature related to earnings management under different accounting regimes and economic environments.
Merjona Lamaj
Chapter 5. Descriptive Statistics
Abstract
This chapter describes the sample and the data used in the research design. Section 1 gives the main features of the sample selection and data screening, whereas Section 3 presents the descriptive statistics of the main variables used in the multivariate analyses.
Merjona Lamaj
Chapter 6. Research Design and Results
Abstract
I examine earnings management by analyzing the discretionary use of loan loss provisions of European banks. I focus on LLPs, as one of the main accruals of banks, in order to estimate the extent to which managers use discretion when provisioning for loan losses. I estimate normal (expected) LLP following Beatty et al. (2002) using the following equation
Merjona Lamaj
Chapter 7. Conclusion
Abstract
In this thesis I examine the effect of Covid-19 on banks’ loan loss provisions and their use for earnings management. I find that during Covid-19 banks use more discretion when accounting for loan loss provisions under IFRS 9 than in the period before Covid-19.
Merjona Lamaj
Backmatter
Metadaten
Titel
The Effect of Covid-19 on Loan Loss Provisions and Earnings Management of European Banks
verfasst von
Merjona Lamaj
Copyright-Jahr
2023
Electronic ISBN
978-3-658-40060-6
Print ISBN
978-3-658-40059-0
DOI
https://doi.org/10.1007/978-3-658-40060-6

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