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Earnings management in Brazilian credit unions

  • 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)

Registered author(s):

    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.

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    File URL: http://www.bbronline.com.br/public/edicoes/10_4/artigos/07mr7@0i5513122013151442.pdf
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    Article provided by Fucape Business School in its journal Brazilian Business Review.

    Volume (Year): 10 (2013)
    Issue (Month): 4 (October)
    Pages: 91-109

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    Handle: RePEc:bbz:fcpbbr:v:10:y:2013:i:4:p:91-109
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    1. 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.
    2. 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.
    3. Ojo, Marianne, 2008. "Risk Management by the Basel Committee: Evaluating Progress made from the 1988 Basel Accord to Recent Developments," MPRA Paper 10051, University Library of Munich, Germany.
    4. 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.
    5. 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.
    6. 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.
    7. 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 519-28, May.
    8. 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.
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