Bank income smoothing, ownership concentration and the regulatory environment

Vincent Bouvatier; Laetitia Lepetit; Frank Strobel

doi:10.1016/j.jbankfin.2013.12.001

Journal of Banking & Finance Vol. 41 2014

Bank income smoothing, ownership concentration and the regulatory environment

Vincent Bouvatier^1,2,3; Laetitia Lepetit⁴; Frank Strobel⁵

¹ Centre National de la Recherche Scientifique · ² Université Paris Nanterre · ³ EconomiX · ⁴ Université de Limoges · ⁵ University of Birmingham

open access

Abstract

We empirically examine whether the way a bank might use loan loss provisions to smooth its income is influenced by its ownership concentration and the regulatory environment. Using a panel of European commercial banks, we find evidence that banks with more concentrated ownership use discretionary loan loss provisions to smooth their income. This behavior is less pronounced in countries with stronger supervisory regimes or higher external audit quality. Banks with low levels of ownership concentration do not display such discretionary income smoothing behavior. This suggests the need to improve existing or implement new corporate governance mechanisms.

DOI: 10.1016/j.jbankfin.2013.12.001
Volume: 41
Pages: 253-270
Language: en
Sources: crossref openalex bibtex:phds-export.bib

Bank income smoothing, ownership concentration and the regulatory environment

Abstract

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