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Management of abnormal accounting accruals through the regulatory approach of credit risk: Evidence in the MENA countries' banks before and after the Arab Spring Revolution

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  • Mohamed Sadok GASSOUMA

Abstract

This article examines the effect of credit risk and its regulatory measures on accounting manipulation in 202 banks in the 10 MENA countries. Such a deviation from the regulatory requirements may lead managers to smooth the accounting net income, by applying the "fair full value" method as an accounting method. The purpose of this study is to estimate abnormal accruals using the classical Kothari et al (2005) [11] model and to see their progress before the Arab spring revolution (2000-2010) and after (2011-2014) using the “Difference-in-difference†approach. Second, we propose a linear model, testing the relationship between the abnormal accruals and the credit risk factors. The results show that after the Spring Arab revolution, banks in the MENA countries changed their attitudes towards credit risk. Possible overcapitalization of banks, leads managers to manipulate the credit portfolios values, in order to divert the risk level downwards and disclose false beliefs to the market, in the presence of the prudential supervision deterioration and information asymmetry towards shareholders despite any the legal restructuring. JEL classification numbers: G21, G01, G32, M41.Keywords: Abnormal accruals, credit risk, banking, difference-in-difference.

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  • Mohamed Sadok GASSOUMA, 2019. "Management of abnormal accounting accruals through the regulatory approach of credit risk: Evidence in the MENA countries' banks before and after the Arab Spring Revolution," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 9(3), pages 1-4.
    • Handle: RePEc:spt:apfiba:v:9:y:2019:i:3:f:9_3_4
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    More about this item

    Keywords

    abnormal accruals; credit risk; banking; difference-in-difference.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G01 - Financial Economics - - General - - - Financial Crises
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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