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Income Smoothing Practices Of Us Banks Around The 2008 Financial Crisis

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  • Burak Dolar

Abstract

The financial crisis of 2008 had a profound effect on the US banking industry, causing financial distress and the failure of a large number of banks. In this paper, we investigate whether or not banking institutions smoothed their reported earnings upward through the utilization of loan loss provisions during the financially challenging times of the Great Recession. Using a large dataset of commercial banks and thrifts, our empirical results provide support for the income smoothing hypothesis that banking institutions underestimated their provision for loan losses in order to offset their declining earnings in the period after the financial crisis

Suggested Citation

  • Burak Dolar, 2016. "Income Smoothing Practices Of Us Banks Around The 2008 Financial Crisis," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 10(1), pages 1-11.
    • Handle: RePEc:ibf:ijbfre:v:10:y:2016:i:1:p:1-11
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    Cited by:

    1. Ozili, Peterson K, 2022. "Bank income smoothing during the COVID-19 pandemic: Evidence from UK Banks," MPRA Paper 115782, University Library of Munich, Germany.
    2. William C. Handorf, 2018. "Implications of the Current Expected Credit Loss accounting model," Journal of Banking Regulation, Palgrave Macmillan, vol. 19(3), pages 211-221, July.

    More about this item

    Keywords

    Financial Crisis; Income Smoothing; Provision for Loan Losses; Commercial Banks; Thrifts;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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