|Author:||Yip, Heung Tung Tony|
|Title:||Earnings smoothing in banking industry through advisory fee income : do depositors matter?|
|Advisors:||Tong, H. S. Wilson (AF)|
|Subject:||Hong Kong Polytechnic University -- Dissertations|
Banks and banking -- Accounting
|Department:||Faculty of Business|
|Pages:||5, 142 pages|
|Abstract:||This paper aims to examine whether advisory fee income ("AFI"), the key revenue item that involves significant accounting discretions, is used by bank managers in earnings smoothing. Also, it attempts to examine how depositors, the major funding suppliers for banks, are associated with banks' earnings smoothing behaviour. Based on US bank holding company samples from 2001 to 2017, this paper obtains significant evidence that banks use AFI to smooth earnings. In addition, it demonstrates how different statues of credit ratings, the key element that affect funding from depositors, influence the earnings smoothing magnitude of banks. Results show that earnings smoothing is prevalent for investment-grade but not speculative-grade banks, earnings smoothing activities are stronger for banks with credit ratings under plus or minus notch, and banks report less motive to smooth earnings after recent rating movement. Through the study on various earnings situations and credit ratings statuses, this paper reveals that negative-earnings-investment-grade banks tend to smooth earnings while negative-earnings-speculative-grade banks tend to take big baths. This paper is a pioneer study to investigate the role of AFI and depositors on earnings smoothing of banks; and is the first paper to examine earnings smoothing behaviour with consideration of the earnings and credit ratings mix. The findings have implications to standard setters, bank regulators, credit rating agencies and depositors.|
|Rights:||All rights reserved|
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