The Impact of SFAS 133 on Income Smoothing by Banks through Loan Loss Provisions

• 成果类型: Article
• 署名作者: Kilic, Emre; Lobo, Gerald J.; Ranasinghe, Tharindra; Sivaramakrishnan, K.
• 署名单位: University of Houston System; University of Houston; Singapore Management University; Rice University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-50264
• 发表日期: 2013
• 页码: 233-260
• 关键词: earnings management; risk management; determinants; RECOGNITION; DISCLOSURES

摘要

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 mandatory recognition of hedge ineffectiveness under 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 for future loan defaults and bank stock returns.