Research on Measures of Accounting Conservatism in the Banking Industry
Date Issued
2007
Date
2007
Author(s)
Chiang, Po-Chieh
DOI
en-US
Abstract
This paper is to investigate the impact of three conservatism measures in the banking industry on the association between earnings and stock returns in good and bad news. Three conservatism measures being tested are (1) the NPA coverage ratio: the ratio of allowance for loan losses to total non-performing assets (ALL/NPA), (2) the ratio of allowance for loan and lease losses to net loan write-off (ALL/NLWO), and (3) the market-to-book ratio (MTB).
We find that conditional measures, beginning-of-period ALL/NPA and ALL/NLWO are positively related to earning timeliness to good news but have negative association with earning timeliness to bad news consistent with the scenario of “conservatism with no/non-intensive manipulation” on average. Also, the negative association between (1) unconditional measures, beginning-of-period MTB and (2) timeliness and asymmetry of recognition is verified in our sample of bank holding companies.
Furthermore, we find that on average manipulation behavior is consistently more prevalent in bank holding companies over period 1987-1990 and 1991-2000 as comparison to period 2001-2004. Besides, big-scale firms and high capital ratio firms, as comparison to small-scale firms and low capital ratio firms, tend to engage in heavier manipulation over particular poor (1987-1990) and boom (1991-2000) time.
Subjects
銀行業
不對稱及時性
盈餘操縱
不良資產覆蓋率
市價對帳面值比率
banking industry
accounting conservatism
asymmetric timeliness
management manipulation
NPA coverage ratio
market-to-book ratio
Type
other
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