본문 바로가기
KERD
논문KCI 등재

Off-Balance Sheet and Bank Behavior: Does Market Power Matter?

0

조회

0

다운로드

0

인용

0

참고문헌

키워드

초록

Purpose: This paper examines the significant effect of off-balance sheets (OBS) on earnings management in the banking industry in Indonesia. Furthermore, this study also examines the role of market power as a moderating variable that moderates the relationship between off-balance sheet activities and earnings management. Design/methodology/approach: The off-balance sheet is measured through loan commitment facilities by observing the unused commitment facilities. Moreover, earnings management is measured through discretionary loan loss provisions (DLLP) by seeing the policy management makes in forming loan loss provisions (LLP) as income reduction accounts on the income statement. Multiple regression testing is used to measure the significant effect of off-balance sheet activities on discretionary behavior in LLP and the role of market power as a moderating variable. Findings: The study results show that off-balance sheet activity and market power are related to earnings management. Off-balance sheets have a positive effect on earnings management. Conversely, market power has a negative effect on earnings management. Another finding found that market power weakens the relationship between off-balance sheets and earnings management. Research limitations/implications: This research did not conduct an overall analysis of off-balance sheet exposure in banking financial statements. Thus, future research on total commitments and contingencies such as letters of credit and bank guarantees will be interesting to examine. Originality/value: Previous studies have observed LLP in earnings management and competition policies. However, they had not examined the relationship between the practice of earnings management through LLP toward off-balance sheets and market competition. Therefore, the research gap will be discussed in this study. In addition, the research has two contributions, the first is related to earnings management literature in the banking industry and the second is to assess whether higher bank market power tends to influence earnings management practices through off-balance sheet activities.

Abstract

Purpose: This paper examines the significant effect of off-balance sheets (OBS) on earnings management in the banking industry in Indonesia. Furthermore, this study also examines the role of market power as a moderating variable that moderates the relationship between off-balance sheet activities and earnings management. Design/methodology/approach: The off-balance sheet is measured through loan commitment facilities by observing the unused commitment facilities. Moreover, earnings management is measured through discretionary loan loss provisions (DLLP) by seeing the policy management makes in forming loan loss provisions (LLP) as income reduction accounts on the income statement. Multiple regression testing is used to measure the significant effect of off-balance sheet activities on discretionary behavior in LLP and the role of market power as a moderating variable. Findings: The study results show that off-balance sheet activity and market power are related to earnings management. Off-balance sheets have a positive effect on earnings management. Conversely, market power has a negative effect on earnings management. Another finding found that market power weakens the relationship between off-balance sheets and earnings management. Research limitations/implications: This research did not conduct an overall analysis of off-balance sheet exposure in banking financial statements. Thus, future research on total commitments and contingencies such as letters of credit and bank guarantees will be interesting to examine. Originality/value: Previous studies have observed LLP in earnings management and competition policies. However, they had not examined the relationship between the practice of earnings management through LLP toward off-balance sheets and market competition. Therefore, the research gap will be discussed in this study. In addition, the research has two contributions, the first is related to earnings management literature in the banking industry and the second is to assess whether higher bank market power tends to influence earnings management practices through off-balance sheet activities.

참고문헌 (52)

  1. Adams, B., "Earnings management and initial public offerings : the case of the depository industry", Journal of Banking and Finance, 33(12), pp.2363~2372 (2009)
  2. Amidu, M., "Does bank competition and diversification lead to greater stability? Evidence from emerging markets", Review of Development Finance, 3(3), pp.152~166 (2013)
  3. Amidu, M., "Earnings management, funding, and diversification strategies of banks in Africa", Accounting Research Journal, 28(2), pp.172~194 (2015)
  4. Ariss, T, R., "On the implications of market power in banking : Evidence from developing countries", Journal of Banking & Finance, 34(4), pp.765~775 (2010)
  5. Avery, R. B., "Loan commitments and bank risk exposure", Journal of Banking & Finance, 15(1), pp.173~192 (1991)
  6. Balla, E., "Loan loss Reserve Accounting and Bank Behavior. Federal Reserve Bank of Richmond", Economic Brief, 12(3), pp.1~4 (2012)
  7. Beaver, W. H., "Discretionary Behavior With Respect to Allowances for Loan Losses and The Behavior of Security Prices", Journal of Accounting and Economic, 22(1-3), pp.177~206 (1996)
  8. Beck, T., "Bank Competition and Stability : Cross-Country Heterogeneity", Journal of Financial Intermediation, 22(2), pp.218~244 (2013)
  9. Berger, A. N., "Bank Liquidity Creation Following Regulatory Interventions and Capital Support", Journal of Financial Intermediation, 26, pp.115~141 (2016)
  10. Boyd, J. H., "The theory of bank risk taking, and competition revisited", Journal of Finance, 60(3), pp.1329~1343 (2005)
  11. Chotigeat, T., "How Bank Loans Are Priced : A Comparative Study Between Asia and Western Europe", Global Business & Finance Review, 13(2), pp.55~70 (2008)
  12. Church, J., "Industrial Organization: A Strategic Approach" (2000), McGraw-Hill
  13. Curcio, D., "Earnings and capital management and signaling : The use of loan-loss provisions by European banks", The European Journal of Finance, 21(1), pp.26~50 (2015)
  14. DeYoung, R., "Nontraditional banking activities and bank failures during the financial crisis", Journal of Financial Intermediation, 22(3), pp.397~421 (2013)
  15. Dou, Y., "T he E ffect of Credit Competition on Banks' Loan Loss Provision", The Journal of Financial and Quantitative Analysis, 53(3), pp.1195~1226 (2018)
  16. El Sood, H. A., "Loan Loss Provisioning and Income Smoothing in US Banks Pre and Post the Financial Crisis", International Review of Financial Analysis, 25, pp.64~72 (2012)
  17. Ergungor, O. E., "Market- vs. Bank-Based Financial Systems: Do Rights and Regulations Really Matter?", Journal of Banking & Finance, 28(12), pp.2869~2887 (2004)
  18. Foo, J., "China's Banking Reform and Hidden Risk", Global Business & Finance Review, 14(2), pp.143~158 (2009)
  19. Foos, D., "Loan growth and riskiness of banks", Journal of Banking and Finance, 34(12), pp.2929~2940 (2010)
  20. Fu, X., "Bank Competition and Financial Stability in Asia Pacific", Journal of Banking and Finance, 38, pp.64~77 (2014)
  21. Gilbert, R. A., "The Future of Community Banks: Lessons from Banks That Thrived During the Recent Financial Crisis", Federal Reserve Bank of St. Louis Review, 95(2), pp.115~143 (2013)
  22. Goetz, M. R., "Competition and bank stability", Journal of Financial Intermediation, 35, pp.57~69 (2018)
  23. Hasan, I., "Determinants of the Loan Loss Allowance : Some Cross-Country Comparisons", The Financial Review, 39(1), pp.129~152 (2004)
  24. Hassan, M. K., "A Methodological Investigation of Risk Exposure of Bank Off-Balance Sheet Loan Commitment Activities", The Quarterly Review of Economics and Finance, 34(3), pp.283~299 (1994)
  25. Kanagaretnam, K., "Managerial Incentives for Income Smoothing Through Bank Loan Loss Provisions", Review of Quantitative Finance and Accounting, 20(1), pp.63~80 (2003)
  26. Kanagaretnam, K., "Determinants of Signaling by Banks Through Loan Loss Provisions", Journal of Business Research, 58(3), pp.312~320 (2005)
  27. Kashian, R. D., "Off-Balance Sheet Activities and Community Bank Performance", Journal of Economic Studies, 41(6), pp.789~807 (2014)
  28. Laeven, L., "Is There a Diversification Discount in Financial Conglomerates", Journal of Financial Economics, 85(2), pp.331~367 (2007)
  29. Laeven, L., "Loan Loss Provisioning and Economic Slowdowns: Too Much, Too Late?", Journal of Financial Intermediation, 12(2), pp.178~197 (2003)
  30. Lepetit, L., "Bank Income Structure and Risk : An Empirical Analysis of European Banks", Journal of Banking and Finance, 32(8), pp.1452~1467 (2008)
  31. Lepetit, L., "The Expansion of Services in European banking : Implications For Loan Pricing And Interest Margins", Journal of Banking and Finance, 32(11), pp.2325~2335 (2008)
  32. Leventis, S., "Loan Loss Provisions, earnings management and capital management under IFRS : The case of EU commercial banks", Journal of Financial Services Research, 40(1), pp.103~122 (2011)
  33. Lubis, A. F., "Market Power of Indonesian Banking", Bulletin of Monetary Economics and Banking, 14(3), pp.4~ (2012)
  34. Marton, J., "The predictive ability of Loan Loss Provisions in Banks-Effects of Accounting Standards, Enforcement and Incentives", The British Accounting Review, 49(2), pp.162~180 (2017)
  35. Mckee, G., "Determinants of Recent Structural Change for Small Asset U. S. Credit Unions", Review of Quantitative Finance and Accounting, 47(3), pp.775~795 (2016)
  36. Mckee, G., "Managerial Implications Of Off-Balance Sheet Items in Community Banks", Studies In Economics and Finance, 35(1), pp.178~195 (2018)
  37. Ozili, P. K., "Bank Earnings Smoothing, Audit Quality and Procyclicality in Africa. The Case of Loan Loss Provisions", Review of Accounting and Finance, 16(2), pp.142~161 (2017)
  38. Ozili, P. K., "Discretionary Provisioning Practices Among Western European banks", Journal of Financial Economic Policy, 9(1), pp.109~118 (2017)
  39. Ozili, P. K., "Bank Loan Loss Provisions Research : A Review", Borsa Istanbul Review, 17(3), pp.144~163 (2017)
  40. Papanikolaou, N. I., "The Role of On-and Off-Balance-Sheet Leverage of Banks in The Late 2000s Crisis", Journal of Financial Stability, 14, pp.3~22 (2014)
  41. Pennathur, A. K., "Income Diversification and Risk : Does Ownership Matter? An Empirical Examination of Indian Banks", Journal of Banking and Finance, 36(8), pp.2203~2215 (2012)
  42. Rim, H. K., "The Effect of Off-Balance Sheet Activities on Global Bank Risk : Empirical Study with Capital Market Model", Global Business and Finance Review, 4(1), pp.25~39 (1999)
  43. Rokhim, R., "Funding Liquidity and Risk-Taking Behavior in Southeast Asian Banks", Emerging Markets Finance and Trade, 56(2), pp.305~313 (2018)
  44. Santoso, W., "The Bright Side of Market Power in Asian banking : Implications of Bank Capitalization and Financial Freedom", Research in International Business and Finance, 56, pp.101~358 (2021)
  45. Saunders, A., "Financial Institution Management" (2003), McGraw Hil
  46. Soedarmono. W, "Bank Competition, Crisis and Risk Taking: Evidence from Emerging Markets in Asia", Journal of International Financial Markets, Institutions and Money, 23, pp.196~221 (2013)
  47. Soedarmono, W., "Competition, Financial Intermediation, and Riskiness of Banks : Evidence from the Asia-Pacific Region", Emerging Markets Finance and Trade, 52(4), pp.961~974 (2016)
  48. Soedarmono, W., "Abnormal Loan Growth, Credit Information Sharing and Systemic Risk in Asian Banks", Research in International Business and Finance, 42, pp.1208~1218 (2017)
  49. Standar Akuntansi Keuangan, "PSAK 71: Instrumen Keuangan", Institute of Indonesia Chartered Accountants, ~ (2021)
  50. Standar Akuntansi Keuangan, "PSAK 55: Pengukuran dan Pengakuan", Institute of Indonesia Chartered Accountants, ~ (2021)
  51. Tran, D. V., "Discretionary Loan Loss Provision Behavior in The US Banking Industry", Review of Quantitative Finance and Accounting, 55, pp.605~645 (2019)
  52. Bank Risk Exposure, Bank Failure and Off-Balance Sheet Activities: An Empirical Analysis for U.S. Commercial Banks, "Ziadeh, N.", SSRN Electronic, ~ (2012)

관련 논문AI추천

이 간행물의 다른 논문 (15건)