Browsing by Subject "M41"

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  • Delis, Manthos D.; Hasan, Iftekhar; Iosifidi, Maria; Li, Lingxiang (Elsevier, 2018)
    Journal of Banking & Finance December ; 2018
    Using the full sample of U.S. banks and hand-collected data on enforcement actions over 2000–2014, we analyze the role of these interventions in promoting several aspects of accounting quality. We find that enforcement actions issued for both risk-related and accounting-related reasons lead to significant improvements in accounting quality. This improvement is consistently found for earnings smoothing, big-bath accounting, timely recognition of future loan losses, the association of loan loss provisions with future loan charge offs, loss avoidance, and cash flow predictability and earnings persistence. Most of the effects are somewhat more potent in the crisis period and survive in several sensitivity tests. Our findings highlight the imperative role of regulatory interventions in promoting bank accounting quality.
  • Duru, Augustine; Hasan, Iftekhar; Song, Liang; Zhao, Yijiang (2020)
    Accounting and Business Research 3
    We construct measures of accounting regulations and enforcement mechanisms that are specific to a country's banking industry. Using a sample of major banks in 37 economies, we find that the informativeness of banks’ financial statements, measured by the value relevance of earnings and common equity, is higher in countries with stricter bank accounting regulations and countries with stronger enforcement. These findings suggest that superior bank accounting and enforcement mechanisms enhance the informativeness of banks’ financial statements. In addition, we find that the effects of bank accounting regulations are more pronounced in countries with stronger enforcement in the banking industry, suggesting that enforcement is complementary to bank accounting regulations in achieving higher value relevance of financial statements. Our study has important policy implications for bank regulators.
  • Fang, Yiwei; Hasan, Iftekhar; Li, Lingxiang (2014)
    BOFIT Discussion Papers 19/2014
    ​The dynamic banking reforms of Central and Eastern Europe (CEE) following the collapse of the Soviet Union provide an ideal research setting for examining the causal effect of institutional development on financial reporting. Using five earnings quality measures, we consistently find that banking reform improves accounting quality and reduces earnings management incentives in the 16 transition countries considered. The results strongly hold in our within-country and difference-in-difference models, as well as in non-parametric analyses. We also find supporting evidence for the notion that excessive risk-taking of banks impairs earnings quality. As a result, banking reform improves earnings quality partially through its ability to curb risk-taking behavior. Publication keywords: earnings management, earnings quality, institutional development, bank risk-taking
  • Hasan, Iftekhar; Hoi, Chun-Keung (Stan); Wu, Qiang; Zhang, Hao (2017)
    Bank of Finland Research Discussion Papers 21/2017
    Published in Journal of Accounting Research, Volume 55, Issue 3, June 2017: 629-668
    We investigate whether the levels of social capital in US counties, as captured by strength of civic norms and density of social networks in the counties, are systematically related to tax avoidance activities of corporations with headquarters located in the counties. We find strong negative associations between social capital and corporate tax avoidance, as captured by effective tax rates and book-tax differences. These results are incremental to the effects of local religiosity and firm culture toward socially-irresponsible activities. They are robust to using organ donation as an alternative social capital proxy and fixed effect regressions. They extend to aggressive tax avoidance practices. Additionally, we provide corroborating evidence using firms with headquarter relocation that changes the exposure to social capital. We conclude that social capital surrounding corporate headquarters provides environmental influences constraining corporate tax avoidance.
  • Hasan, Iftekhar; Hoi, Chun-Keung (Stan); Wu, Qiang; Zhang, Hao (2017)
    Journal of Accounting Research 3 ; June
    BoF DP 21/2017
    We investigate whether the levels of social capital in U.S. counties, as captured by strength of civic norms and density of social networks in the counties, are systematically related to tax avoidance activities of corporations with headquarters located in the counties. We find strong negative associations between social capital and corporate tax avoidance, as captured by effective tax rates and book-tax differences. These results are incremental to the effects of local religiosity and firm culture toward socially irresponsible activities. They are robust to using organ donation as an alternative social capital proxy and fixed effect regressions. They extend to aggressive tax avoidance practices. Additionally, we provide corroborating evidence using firms with headquarters relocation that changes the exposure to social capital. We conclude that social capital surrounding corporate headquarters provides environmental influences constraining corporate tax avoidance. Copyright ©, University of Chicago on behalf of the Accounting Research Center, 2016
  • Francis, Bill; Hasan, Iftekhar; Wu, Qiang; Park, Jong Chool (2014)
    Bank of Finland Research Discussion Papers 1/2014
    Published in Contemporary Accounting Research, Volume 32, Issue 3, September 2015: 1285–1318
    This paper investigates the effect of CFO gender on corporate financial reporting decision-making. Focusing on firms that experience changes of CFO from male to female, the paper compares the firms' degree of accounting conservatism between pre- and post-transition periods. We find that female CFOs are more conservative in their financial reporting. In addition, we find that the relation between CFO gender and conservatism varies with the levels of various firm risks such as litigation risk, default risk, systematic risk, and CFO specific risk such as job security risk. We further find that risk-aversion of female CFOs is associated with less equity-based compensation, lower firm risk, higher tangibility level, and lower dividend payout level. Overall, the study provides strong support for the notion that female CFOs are more risk averse than male CFOs, which leads female CFOs to adopt more conservative financial reporting policies. Keywords: Accounting Conservatism; Gender; CFO; Risk-Aversion. JEL Classification: M41; J16
  • Mazboudi, Mohamad; Hasan, Iftekhar (2017)
    Bank of Finland Research Discussion Papers 19/2017
    Published in Journal of International Financial Markets, Institutions and Money 54 ; May ; 2018 http://urn.fi/URN:NBN:fi:bof-201806011608
    This study examines how national culture affects corporate investment. We argue that national culture affects corporate investment efficiency through the level of secrecy that national culture exhibits. Using a sample of firms from eight culturally-diverse European Union countries, we find that the level of secrecy that national culture exhibits is negatively related to corporate investment efficiency after controlling for a number of firm- and country-level factors. We also find that the negative relation between national culture and corporate investment efficiency is mitigated by an exogenous shock to the information asymmetry problem between managers and investors. Our study highlights the importance of the cultural value of secrecy/transparency as a determinant of investment efficiency at the firm-level.
  • Mazboudi, Mohamad; Hasan, Iftekhar (2018)
    Journal of International Financial Markets, Institutions and Money May ; 2018
    Published in Bank of Finland Research Discussion Papers 19/2017.
    This study examines how national culture affects corporate investment. We argue that national culture affects corporate investment efficiency through the level of secrecy that national culture exhibits. Using a sample of firms from eight culturally-diverse European Union countries, we find that the level of secrecy that national culture exhibits is negatively related to corporate investment efficiency after controlling for a number of firm- and country-level factors. We also find that the negative relation between national culture and corporate investment efficiency is mitigated by an exogenous shock to the information asymmetry problem between managers and investors. Our study highlights the importance of the cultural value of secrecy/transparency as a determinant of investment efficiency at the firm-level.
  • Francis, Bill; Hasan, Iftekhar; Wu, Qiang (2013)
    Bank of Finland Research Discussion Papers 8/2013
    Using the recent financial crisis as a natural quasi-experiment, we test whether and to what extent conservative accounting affects shareholder value. We find that there is significantly positive and economically meaningful relation between conservatism and firm stock performance during the current crisis. The result holds for alternative measures of conservatism and is validated in a series of robustness checks. We further find that the relation between conservatism and firm value is more pronounced for firms with weaker corporate governance or higher information asymmetry. Overall, our paper complements LaFond and Watts (2008) by providing empirical evidence to their argument that conservatism is an efficient governance mechanism to mitigate information risk and control for agency problems, and that shareholders benefit from it. JEL Classification: M41; M48; G01 Keywords: Accounting conservatism, Shareholder value, Financial crisis
  • Leventis, Stergios; Hasan, Iftekhar; Dedoulis, Emmanouil (2013)
    Bank of Finland Research Discussion Papers 13/2013
    Published in International Review of Financial Analysis, Volume 29, September 2013, Pages 152-165
    In this paper we provide evidence for the effects of social norms on audit pricing by studying companies belonging to the alcohol, firearms, gambling, military, nuclear power, and tobacco industries, which are often described as "sin" companies. We hypothesize that the disparities between "sin" firms operations and prevailing social norms create an adverse context which heightens the client's business risk assessment by auditors and is, thereby, reflected in the pricing decisions for audit and consulting services. Having controlled for the impact of variables relating to client attributes, auditor attributes and engagement attributes, we demonstrate that audit firms charge significantly higher audit and consulting fees to companies that deviate from prevailing social norms. Additionally, we show that audit pricing levels within the "sin" group depend both on prevailing political views and on the level of "vice" exhibited by "sin" companies. Keywords: Social norms, audit pricing, controversial industries, sin companies. JEL Classification: G21, G30, G34, G38, M41.
  • Hasan, Iftekhar; Kim, Incheol; Teng, Haimeng; Wu, Qiang (2016)
    Bank of Finland Research Discussion Papers 26/2016
    This study examines whether foreign institutional investors (FIIs) help explain variation in corporate tax avoidance and whether mechanisms such as tax morality, investment horizon, and corporate governance underlie the relation between FIIs and tax avoidance. We find robust evidence that FIIs are negatively associated with corporate tax avoidance. Moreover, this negative association is dominated by FIIs from countries with high tax morality, FIIs with long-term investment horizons, and FIIs from countries with high corporate governance quality. We conclude that FIIs play an active role in shaping corporate tax avoidance policy.
  • Anandarajan, Asokan; Hasan, Iftekhar; McCarthy, Cornelia (2006)
    Bank of Finland Research Discussion Papers 23/2006
    The objective of this study is to examine whether and to what extent Australian banks use loan loss provisions (LLPs) for capital management, earnings management and signalling.We examine if there were changes in the use of LLPs due to the implementation of banking regulations consistent with the Basel Accord of 1988 which made loan loss reserves no longer part of Tier I capital in the numerator of the capital adequacy ratio.We find some evidence to indicate that Australian banks use LLPs for capital management, but no evidence of a change in this behaviour after the implementation of the Basel Accord.Our results indicate that banks in Australia use LLPs to manage earnings.Further, listed commercial banks engage more aggressively in earnings management using LLPs than unlisted commercial banks.We also find that earnings management behaviour is more pronounced in the post-Basel period.Overall, we find a significant understating of LLPs in the post-Basel period relative to the pre-Basel period.This indicates that reported earnings may not reflect the true economic reality underlying those numbers.Finally, Australian banks do not appear to use LLPs for signalling future intentions of higher earnings to investors. Keywords: capital management, earnings management, signalling, Australian banks JEL classification numbers: C23, G14, M41