Bank accounting regulations, enforcement mechanisms, and financial statement informativeness: cross-country evidence. Issue 3 (15th April 2020)

• Record Type: Journal Article
• Authors: Duru, Augustine; Hasan, Iftekhar; Song, Liang; Zhao, Yijiang
• Is Part Of: Accounting and business research. Volume 50:Issue 3(2020)
• Page Start: 269
• Page End: 304
• Publication Date: 2020-04-15
• Subjects: bank accounting regulations -- industry-specific enforcement mechanisms -- financial statement informativeness -- banking transparency; M41 -- M48; Accounting -- Periodicals; Accounting -- Research -- Periodicals; Business -- Periodicals; Comptabilité -- Périodiques; Comptabilité -- Recherche -- Périodiques; Affaires -- Périodiques; Accounting; Electronic journals; 658.15
• DOI: 10.1080/00014788.2017.1415801
• Languages: English
• ISSNs: 0001-4788

Abstract

Abstract : We construct measures of accounting regulations and enforcement mechanisms that are specific to a country's banking industry. Using a sample of major banks in 37 economies, we find that the informativeness of banks' financial statements, measured by the value relevance of earnings and common equity, is higher in countries with stricter bank accounting regulations and countries with stronger enforcement. These findings suggest that superior bank accounting and enforcement mechanisms enhance the informativeness of banks' financial statements. In addition, we find that the effects of bank accounting regulations are more pronounced in countries with stronger enforcement in the banking industry, suggesting that enforcement is complementary to bank accounting regulations in achieving higher value relevance of financial statements. Our study has important policy implications for bank regulators.