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Is accounting enforcement related to risk-taking in the banking industry?

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  • Dal Maso, Lorenzo
  • Kanagaretnam, Kiridaran
  • Lobo, Gerald J.
  • Mazzi, Francesco

Abstract

Using a sample of banks from 36 countries, we document that accounting enforcement is negatively related to bank risk-taking. We also provide evidence that accounting enforcement enhances bank stability during the crisis. In addition, we show that banks assume less risk through more conservative lending decisions and a reduction in complexity in jurisdictions with higher accounting enforcement. Our results show that formal institutions such as accounting enforcement are associated with bank financial decisions and risk-taking behavior.

Suggested Citation

  • Dal Maso, Lorenzo & Kanagaretnam, Kiridaran & Lobo, Gerald J. & Mazzi, Francesco, 2020. "Is accounting enforcement related to risk-taking in the banking industry?," Journal of Financial Stability, Elsevier, vol. 49(C).
    • Handle: RePEc:eee:finsta:v:49:y:2020:i:c:s1572308920300577
    DOI: 10.1016/j.jfs.2020.100758
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    2. Fard, Amirhossein & Javadi, Siamak & Kim, Incheol, 2020. "Environmental regulation and the cost of bank loans: International evidence," Journal of Financial Stability, Elsevier, vol. 51(C).

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    More about this item

    Keywords

    Accounting Enforcement; Bank Risk-taking; Bank Complexity; Bank Reporting Discretion;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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