Earnings Management and Value Relevance Consequences of SFAS 133: Evidence from Bank Holding Companies
We examine the impact of SFAS 133, Accounting for Derivative Instruments and Hedging Activities, on the reporting behavior of commercial banks and the informativeness of their financial statements. We argue that because the stricter recognition and classification requirements of SFAS 133 reduced banks' ability to smooth income through derivatives, banks that are more affected by SFAS 133 rely more on loan loss provisions to smooth income. We find evidence consistent with this argument. We also find that the increased reliance on loan loss provisions for smoothing income has impaired the informativeness of loan loss provisions but not the informativeness of earnings before loan loss provisions.
Accounting | Corporate Finance
Financial Performance Analysis
American Accounting Association Annual Meeting
City or Country
San Francisco, CA, USA
RANASINGHE, Tharindra; Kilic, E.; Lobo, G.; and Sivaramakrishnan, K..
Earnings Management and Value Relevance Consequences of SFAS 133: Evidence from Bank Holding Companies. (2010). American Accounting Association Annual Meeting. Research Collection School Of Accountancy.
Available at: http://ink.library.smu.edu.sg/soa_research/888