THE EFFECTS OF CHANGES IN ACCOUNTING STANDARDS ON LOAN LOSS PROVISIONS (LLP) AS EARNINGS MANAGEMENT DEVICE: EVIDENCE FROM MALAYSIA AND NIGERIA BANKS (PART I)
Journal Title: European Journal of Business and Social Sciences - Year 2014, Vol 3, Issue 8
Abstract
In view of dearth of studies on changes in accounting standards and banks’ earnings management particularly in the context of emerging economies, and the recent Malaysia and Nigeria change from their respective local GAAP to IFRS, this study deemed it overwhelming to investigate the effects of the switch on banks’ earnings management focusing on LLP as the manipulative device. Particularly, this study investigates both discretionary LLP and LLP earnings management pattern for Malaysia and Nigeria banks. This study also investigates credit quality in the context of different accounting standards. Accordingly, this study employed judgmental sampling to select twenty eight banks- eight Malaysia and twenty Nigeria banks as sample covering period 2008-2013. Findings suggest that DLLP significantly reduce post IFRS adoption for Malaysia and Nigeria banks. Also, earnings management pattern of income minimization significantly declined and credit quality remarkably increased post IFRS adoption. Malaysia and Nigeria banks use LLP to manage reported earnings more prior to IFRS implementation. With results demonstrating that IFRS adoption is associated with lower earnings management via LLP, this study recommends the global adoption of IFRS as reporting framework. Originality: This study is one of very few studies which have investigated Malaysia and Nigeria banks earnings management via LLP in the context of changes in accounting standards.
Authors and Affiliations
UGBEDE ONALO| FACULTY OF TECHNOLOGY MANAGEMENT, UNIVERSITI TUN HUSSEIN ONN MALAYSIA, MOHD LIZAM| FACULTY OF TECHNOLOGY MANAGEMENT, UNIVERSITI TUN HUSSEIN ONN MALAYSIA, AHMAD KASERI| FACULTY OF TECHNOLOGY MANAGEMENT, UNIVERSITI TUN HUSSEIN ONN MALAYSIA, OTACHE INNOCENT| SCHOOL OF BUSINESS MANAGEMENT, UNIVERSITI UTARA MALAYSIA
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