National Supervision and Income Smoothing in Banks’ Annual Reports

This book tackles the debated relationship between the characteristics of national supervisory systems and manipulative practices in banks’ annual reports, with a specific focus on income smoothing. Since the 2008 financial crisis, governmental bodies and regulators have stressed the crucial role of supervision for bank transparency purposes, but the effects of supervision on accounting manipulation are still discussed. The volume investigates whether the characteristics of national supervision affect bank propensity to smooth income. It also considers the potential role of bank business model, as recent research suggests its influence on banks’ accounting manipulations. The empirical analysis employs a single rich dataset including data from financial statements of European banks from 2003 to 2015, country-level variables for the supervisory style, and data from the Asset Quality Review conducted by the European Central Bank. Overall, the evidence provided enables comparison between the effects of different supervisory features and gaining a broad understanding of the phenomenon.