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Earnings management and bank funding

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Listed:
  • Van Dan Dang
  • Hoang Chung Nguyen

Abstract

This paper investigates the impact of earnings management on bank funding. Using a sample of Vietnamese commercial banks between 2007 and 2019, we reveal that greater earnings opacity of banks causes a significant drop in total bank funding. When decomposing total funding into its components, we find that wholesale funds are the primary driver of the result, while no significant effect of earnings manipulation on retail deposits is documented. Further analyses on bank heterogeneity indicate that the unfavourable impact of earnings opacity on banks' wholesale funds is less pronounced for banks that are better capitalised, more liquid, larger in size, more profitable, and less risky. Through this consistent pattern, we can conclude that the financial strength of banks may alleviate the adverse effect of earnings opacity on bank funding. Our findings firmly survive after a series of robustness tests.

Suggested Citation

  • Van Dan Dang & Hoang Chung Nguyen, 2024. "Earnings management and bank funding," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 30(1), pages 72-92.
    • Handle: RePEc:ids:gbusec:v:30:y:2024:i:1:p:72-92
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