Bank income smoothing, ownership concentration and the regulatory environment

V. Bouvatier, L. Lepetit, F. Strobel

Research output: Contribution to journalArticlepeer-review

61 Citations (Scopus)
458 Downloads (Pure)

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.
Original languageEnglish
Pages (from-to)253-270
Number of pages18
JournalJournal of Banking & Finance
Volume41
Issue number1
Early online date19 Feb 2014
DOIs
Publication statusPublished - 1 Apr 2014

Keywords

  • income smoothing; loan loss provisions; ownership con- centration, regulatory environment

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