Publication Type
Journal Article
Version
Preprint
Publication Date
1-2013
Abstract
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 more affected by SFAS 133 will 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.
Keywords
SFAS 133, Income Smoothing, Hedging, Derivatives, Loan Loss Provisions
Discipline
Accounting | Corporate Finance
Research Areas
Financial Performance Analysis
Publication
Accounting Review
Volume
88
Issue
1
First Page
233
Last Page
260
ISSN
0001-4826
Identifier
10.2308/accr-50264
Publisher
American Accounting Association
City or Country
USA
Citation
Kilic, Emre; LOBO, Gerald J.; RANASINGHE, Tharindra; and Sivaramakrishnan, K..
The impact of SFAS133 on income smoothing by banks through loan loss provisions. (2013). Accounting Review. 88, (1), 233-260.
Available at: https://ink.library.smu.edu.sg/soa_research/984
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
http://doi.org/10.2308/accr-50264