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Expected credit losses and managerial discretion. Current practices and future challenges

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  • Riccardo Macchioni
  • Alessandra Allini
  • Martina Prisco

Abstract

This paper examines the loan loss provisioning behaviour during the transition from IAS 39 to IFRS 9 for a sample of 403 banks in 27 countries in European Union. The objective of the study is to investigate whether during the first years of adoption of the new expected credit loss (ECL) impairment model banks are more en-couraged to smooth earnings and manage capital, compared to the previous in-curred loss (ICL) model. Results show that under ECL, banks adopt a more ag-gressive opportunistic behaviour in accordance with the income-smoothing and capital management approach. Management should be aware of this to implement monitoring and control systems, increasing trustworthiness of financial in-formation for investors? expectations.

Suggested Citation

  • Riccardo Macchioni & Alessandra Allini & Martina Prisco, 2021. "Expected credit losses and managerial discretion. Current practices and future challenges," MANAGEMENT CONTROL, FrancoAngeli Editore, vol. 2021(3), pages 111-134.
    • Handle: RePEc:fan:macoma:v:html10.3280/maco2021-003006
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    Cited by:

    1. Rosa Lombardi, 2021. "Le dimensioni della conoscenza aziendale. Profili di investigazione tra crisi pandemica ed economia digitale," MANAGEMENT CONTROL, FrancoAngeli Editore, vol. 2021(3), pages 5-14.

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