Balancing acts: bank market deregulation and the dynamics of earnings management

Mi, B. ORCID: https://orcid.org/0000-0002-5063-8673, Zhang, L. and Han, L. (2025) Balancing acts: bank market deregulation and the dynamics of earnings management. International Review of Financial Analysis, 101. 104040. ISSN 1057-5219 doi: 10.1016/j.irfa.2025.104040

Abstract/Summary

This study examines the impact of bank market deregulation in U.S. since 1994 on corporate earnings management decision makings. We show that bank market deregulation has led to a trade off between accrual based earnings management and real earnings management. The trade off is driven by the improved monitoring of banks since deregulation where banks pay more diligence to monitor accruals which are reverse in a short term and more relevant to the default risk banks expose to. To respond, firms engage in more real earnings management which has a long term impact on corporate performance but is less relevant to current default risk.

Item Type	Article
URI	https://reading-clone.eprints-hosting.org/id/eprint/121597
Identification Number/DOI	10.1016/j.irfa.2025.104040
Refereed	Yes
Divisions	Henley Business School > Finance and Accounting
Publisher	Elsevier
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