Income Smoothing Practices of US Banks Around the 2008 Financial Crisis

International Journal of Business Research, v. 10 (1) p. 1-11

12 Pages Posted: 28 Jan 2016

See all articles by Burak Dolar

Burak Dolar

Western Washington University

Date Written: 2016

Abstract

The financial crisis of 2008 had a profound effect on the US banking industry, causing financial distress and the failure of a large number of banks. In this paper, we investigate whether or not banking institutions smoothed their reported earnings upward through the utilization of loan loss provisions during the financially challenging times of the Great Recession. Using a large dataset of commercial banks and thrifts, our empirical results provide support for the income smoothing hypothesis that banking institutions underestimated their provision for loan losses in order to offset their declining earnings in the period after the financial crisis.

Keywords: Financial Crisis, Income Smoothing, Provision for Loan Losses, Commercial Banks, Thrifts

JEL Classification: G21, M41

Suggested Citation

Dolar, Burak, Income Smoothing Practices of US Banks Around the 2008 Financial Crisis (2016). International Journal of Business Research, v. 10 (1) p. 1-11, Available at SSRN: https://ssrn.com/abstract=2669641

Burak Dolar (Contact Author)

Western Washington University ( email )

516 High Street
Bellingham, WA 98225
United States

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