Research on Measures of Accounting Conservatismin the Banking Industry

• Main Authors: Po-Chieh Chiang, 江柏節
• Other Authors: Chi-Chun Liu
• Format: Others
• Language: en_US
• Published: 2007
• Online Access: http://ndltd.ncl.edu.tw/handle/63346121992171158879

碩士 === 國立臺灣大學 === 會計學研究所 === 95 === This paper is to investigate the impact of three conservatism measures in the banking industry on the association between earnings and stock returns in good and bad news. Three conservatism measures being tested are (1) the NPA coverage ratio: the ratio of allowance for loan losses to total non-performing assets (ALL/NPA), (2) the ratio of allowance for loan and lease losses to net loan write-off (ALL/NLWO), and (3) the market-to-book ratio (MTB). We find that conditional measures, beginning-of-period ALL/NPA and ALL/NLWO are positively related to earning timeliness to good news but have negative association with earning timeliness to bad news consistent with the scenario of “conservatism with no/non-intensive manipulation” on average. Also, the negative association between (1) unconditional measures, beginning-of-period MTB and (2) timeliness and asymmetry of recognition is verified in our sample of bank holding companies. Furthermore, we find that on average manipulation behavior is consistently more prevalent in bank holding companies over period 1987-1990 and 1991-2000 as comparison to period 2001-2004. Besides, big-scale firms and high capital ratio firms, as comparison to small-scale firms and low capital ratio firms, tend to engage in heavier manipulation over particular poor (1987-1990) and boom (1991-2000) time.