IDEAS home Printed from https://ideas.repec.org/a/bbz/fcpbbr/v10y2013i4p91-109.html
   My bibliography  Save this article

Earnings management in Brazilian credit unions

Author

Listed:
  • Saulo Cardoso Maia

    (Centre for Higher Education Lafaiete)

  • Valéria Gama Fully Bressan

    (Federal University of Minas Gerais)

  • Wagner Moura Lamounier

    (Federal University of Minas Gerais)

  • Marcelo José Braga

    (Federal University of Viçosa)

Abstract

This article investigates the practice of earnings management by Brazilian credit unions. The main focus is to check for the existence of earnings management to meet the capital adequacy requirements imposedby the Brazilian Central Bank, in line with the Basel Accords. The study also examines the occurrence of income smoothing across credit unions as well as earnings management to avoid reporting losses. The results indicate that the studied institutions do not manage their earnings towards regulatory capital adequacy, but they do engage in income smoothing and earnings management to avoid reporting losses.

Suggested Citation

  • Saulo Cardoso Maia & Valéria Gama Fully Bressan & Wagner Moura Lamounier & Marcelo José Braga, 2013. "Earnings management in Brazilian credit unions," Brazilian Business Review, Fucape Business School, vol. 10(4), pages 91-109, October.
    • Handle: RePEc:bbz:fcpbbr:v:10:y:2013:i:4:p:91-109
    as

    Download full text from publisher

    File URL: http://bbronline.com.br/index.php/bbr/article/download/190/290
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. David Hillier & Allan Hodgson & Peta Stevenson-Clarke & Suntharee Lhaopadchan, 2008. "Accounting Window Dressing and Template Regulation: A Case Study of the Australian Credit Union Industry," Journal of Business Ethics, Springer, vol. 83(3), pages 579-593, December.
    2. Smith, Donald J & Cargill, Thomas F & Meyer, Robert A, 1981. "An Economic Theory of a Credit Union," Journal of Finance, American Finance Association, vol. 36(2), pages 519-528, May.
    3. Hansen, Christian B., 2007. "Generalized least squares inference in panel and multilevel models with serial correlation and fixed effects," Journal of Econometrics, Elsevier, vol. 140(2), pages 670-694, October.
    4. Beatty, A & Chamberlain, Sl & Magliolo, J, 1995. "Managing Financial Reports Of Commercial-Banks - The Influence Of Taxes, Regulatory Capital, And Earnings," Journal of Accounting Research, Wiley Blackwell, vol. 33(2), pages 231-261.
    5. Jacob, John & Jorgensen, Bjorn N., 2007. "Earnings management and accounting income aggregation," Journal of Accounting and Economics, Elsevier, vol. 43(2-3), pages 369-390, July.
    6. Collins, Jh & Shackelford, Da & Wahlen, Jm, 1995. "Bank Differences In The Coordination Of Regulatory Capital, Earnings, And Taxes," Journal of Accounting Research, Wiley Blackwell, vol. 33(2), pages 263-291.
    7. Burgstahler, David & Dichev, Ilia, 1997. "Earnings management to avoid earnings decreases and losses," Journal of Accounting and Economics, Elsevier, vol. 24(1), pages 99-126, December.
    8. Marianne Ojo, 2010. "Risk management by the Basel Committee," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 18(4), pages 305-315, November.
    9. Shrieves, Ronald E. & Dahl, Drew, 2003. "Discretionary accounting and the behavior of Japanese banks under financial duress," Journal of Banking & Finance, Elsevier, vol. 27(7), pages 1219-1243, July.
    10. Ahmed, Anwer S. & Takeda, Carolyn & Thomas, Shawn, 1999. "Bank loan loss provisions: a reexamination of capital management, earnings management and signaling effects," Journal of Accounting and Economics, Elsevier, vol. 28(1), pages 1-25, November.
    11. Hyun, Jung-Soon & Rhee, Byung-Kun, 2011. "Bank capital regulation and credit supply," Journal of Banking & Finance, Elsevier, vol. 35(2), pages 323-330, February.
    12. Moyer, Susan E., 1990. "Capital adequacy ratio regulations and accounting choices in commercial banks," Journal of Accounting and Economics, Elsevier, vol. 13(2), pages 123-154, July.
    13. Baltagi, Badi H. & Wu, Ping X., 1999. "Unequally Spaced Panel Data Regressions With Ar(1) Disturbances," Econometric Theory, Cambridge University Press, vol. 15(6), pages 814-823, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mary E. Barth & Javier Gomez-Biscarri & Ron Kasznik & Germán López-Espinosa, 2017. "Bank earnings and regulatory capital management using available for sale securities," Review of Accounting Studies, Springer, vol. 22(4), pages 1761-1792, December.
    2. Małgorzata Olszak & Mateusz Pipień & Iwona Kowalska & Sylwia Roszkowska, 2017. "What Drives Heterogeneity of Cyclicality of Loan-Loss Provisions in the EU?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 51(1), pages 55-96, February.
    3. Dung Viet Tran & M. Kabir Hassan & Reza Houston, 2020. "Discretionary loan loss provision behavior in the US banking industry," Review of Quantitative Finance and Accounting, Springer, vol. 55(2), pages 605-645, August.
    4. Cummings, James R. & Durrani, Kassim J., 2016. "Effect of the Basel Accord capital requirements on the loan-loss provisioning practices of Australian banks," Journal of Banking & Finance, Elsevier, vol. 67(C), pages 23-36.
    5. Shaharudin, Roselee, 2004. "A Review on Accounts Manipulation Via Loan Loss Provisions to Manage Regulatory Capital and Earnings Along Business Cycle," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 38, pages 99-123.
    6. Beatty, Anne & Liao, Scott, 2014. "Financial accounting in the banking industry: A review of the empirical literature," Journal of Accounting and Economics, Elsevier, vol. 58(2), pages 339-383.
    7. Xu, Xiaolu, 2019. "The association between fair value measurements and banks' discretionary accounting choices11I thank Roger Graham (editor) and two anonymous reviewers for the suggestions and guidance that substantial," Advances in accounting, Elsevier, vol. 44(C), pages 108-120.
    8. Noor Hashim & Weijia Li & John O'Hanlon, 2019. "Reflections on the development of the FASB’s and IASB’s expected-loss methods of accounting for credit losses," Accounting and Business Research, Taylor & Francis Journals, vol. 49(6), pages 682-725, September.
    9. Stergios Leventis & Panagiotis Dimitropoulos & Asokan Anandarajan, 2011. "Loan Loss Provisions, Earnings Management and Capital Management under IFRS: The Case of EU Commercial Banks," Journal of Financial Services Research, Springer;Western Finance Association, vol. 40(1), pages 103-122, October.
    10. Dechow, Patricia & Ge, Weili & Schrand, Catherine, 2010. "Understanding earnings quality: A review of the proxies, their determinants and their consequences," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 344-401, December.
    11. El Sood, Heba Abou, 2012. "Loan loss provisioning and income smoothing in US banks pre and post the financial crisis," International Review of Financial Analysis, Elsevier, vol. 25(C), pages 64-72.
    12. Ignacio Ferrero & Alejo José G. Sison, 2012. "A Survey on Virtue in Business and Management (1980-2011)," Faculty Working Papers 06/12, School of Economics and Business Administration, University of Navarra.
    13. Iftekhar Hasan & Larry D. Wall, 2004. "Determinants of the Loan Loss Allowance: Some Cross‐Country Comparisons," The Financial Review, Eastern Finance Association, vol. 39(1), pages 129-152, February.
    14. P. Barrett Wheeler, 2021. "Unrecognized Expected Credit Losses and Bank Share Prices," Journal of Accounting Research, Wiley Blackwell, vol. 59(3), pages 805-866, June.
    15. Guglielmo Maria Caporale & Matteo Alessi & Stefano Di Colli & Juan Sergio Lopez, 2015. "Loan Loss Provision: Some Empirical Evidence for Italian Banks," CESifo Working Paper Series 5253, CESifo.
    16. Domikowsky, Christian & Bornemann, Sven & Duellmann, Klaus & Pfingsten, Andreas, 2014. "Loan loss provisioning and procyclicality: Evidence from an expected loss model," Discussion Papers 39/2014, Deutsche Bundesbank.
    17. Frederico A. Mourad & Rafael F. Schiozer & Toni R. E. dos Santos, 2020. "Bank Loan Forbearance: evidence from a million restructured loans," Working Papers Series 541, Central Bank of Brazil, Research Department.
    18. Emrah Arbak, 2017. "Identifying the provisioning policies of Belgian banks," Working Paper Research 326, National Bank of Belgium.
    19. Ozili, Peterson K, 2017. "Bank Loan Loss Provisions Research: A Review," MPRA Paper 76495, University Library of Munich, Germany.
    20. Ricardo Schechtman & Tony Takeda, 2018. "Capital (and Earnings) Incentives for Loan Loss Provisions in Brazil: evidence from a crisis-buffering regulatory intervention," Working Papers Series 477, Central Bank of Brazil, Research Department.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bbz:fcpbbr:v:10:y:2013:i:4:p:91-109. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Lasso (email available below). General contact details of provider: https://edirc.repec.org/data/fucapbr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.