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ACCOUNTING CONSERVATISM AND SUSTAINABILITY REPORTING IN CHANGING TIMES: EVIDENCE FROM TURKISH BANKING INDUSTRY

Year 2021, Volume: 23 - Special Issue of MODAV's 17th International Conference on Accounting, 1 - 23, 28.03.2021
https://doi.org/10.31460/mbdd.841329

Abstract

The study aims to examine accounting conservatism in the Turkish banking sector from two sides. These can be expressed as lending policies and sustainability reporting. We firstly investigate whether accounting conservatism improves the lending capacity of banks during crisis periods. We hypothesize that higher conditional conservatism could reduce the adverse effect of the financial crises on the banks' lending capacity. We test our predictions empirically through an unbalanced panel data of 32 Turkish deposit banks in 1999-2019. We secondly examine whether a bank’s engagement in sustainability performance and reporting reduces information asymmetry and leads to less demand for conservatism by outside stakeholders. We test whether a bank conditional conservatism changes or not after starting to report sustainability information. The results of our primary hypotheses are consistent with our predictions and complement and support existing evidence in the empirical literature. We find evidence of the positive impact of conditionally conservative accounting policies on the supply of bank loans. When we test our sustainability reporting hypotheses, incoherent with prior researches and our predictions, there is no significant relationship between sustainability reporting and the level of conservatism.

Supporting Institution

Galatasaray Üniversitesi

Project Number

18.102.003

Thanks

This work is supported by Galatasaray University Scientific Research Fund [grant number: 18.102.003].

References

  • Balakrishnan, K., Watts, R., and Zuo, L. 2016. “The Effect of Accounting Conservatism on Corporate Investment During the Global Financial Crisis”, Journal of Business Finance and Accounting, 43(5) and (6), 513-542.
  • Ball, R., Kothari, S.P., and Robin, A. 2000. “The Effect of International Institutional Factors on Properties of Accounting Earnings”, Journal of Accounting and Economics, 29, 1-51.
  • Ball, Ray, and Shivakumar, L. 2005. “Earnings Quality in UK Private Firms: Comparative Loss Recognition Timeliness”, Journal of Accounting and Economics, 39(1), 83–128.
  • Basu, S. 1997. “The Conservatism Principle and the Asymmetric Timeliness of Earnings”, Journal of Accounting and Economics, 24, 3–37.
  • BDDK, Bankacılık Düzenleme ve Denetleme Kurumu. 2001. https://www.bddk.org.tr/Duyurular/Bankacilik-sektoru-yeniden-yapilandirma-programi/9. Bankacılık Sektörü Yeniden Yapılandırma Programı. (Access Date: 15.09.2020).
  • Beatty, A., and Liao, S. 2011. “Do Delays in Expected Loss Recognition Affect Banks’ Willingness to Lend?”, Journal of Accounting and Economics, 52, 1–20.
  • Bernanke, B., and Lown, C. 1991. “The Credit Crunch”, Brookings Papers on Economic Activity, 2, 205-247.
  • Brei, M., and Schclarek, A. 2013. “Public Bank Lending in Times of Crisis”, Journal of Financial Stability, 9(4), 820–830.
  • Bruno, B., D’Onofrio, A., and Marino, I. 2018. Determinants of Bank Lending in Europe and the United States: Evidence From Crisis and Post-Crisis Years. Oxford University Press.
  • Buallay, A., Fadel, S.M., Alajmi, J., and Saudagaran, S. 2020. “Sustainability Reporting and Bank Performance After Financial Crisis: Evidence From Developed and Developing Countries”, Competitiveness Review. Vol. DOI: 10.1108/CR-04-2019-0040.
  • Burke, Q.L., Chen, P.C., and Lobo, G.J. 2020. “Is Corporate Social Responsibility Performance Related to Conditional Accounting Conservatism?”, Accounting Horizons, 34(2), 19–40.
  • Carlson, M., Shan, H., and Warusawitharana, M. 2013. “Capital Ratios and Bank Lending: A Matched Bank Approach”, Journal of Financial Intermediation, 22, 663-687.
  • Cheng, C.L., and Kung, F.H. 2016. “The Effects of Mandatory Corporate Social Responsibility Policy on Accounting Conservatism”, Review of Accounting and Finance, 15(1), 2–20.
  • Cho, S.Y., Kang, P.K., Lee, C., and Park, C.K. 2020. “Financial Reporting Conservatism and Voluntary CSR Disclosure”, Accounting Horizons, 34(2), 63–82.
  • García-Benau, M.A., Sierra-Garcia, L., and Zorio, A. 2013. “Financial Crisis Impact on Sustainability Reporting”, Management Decision, 51(7), 1528–1542.
  • Hellman, N. 2008. “Accounting Conservatism Under IFRS”, Accounting in Europe, 5(2), 71–100.
  • Herzig, C., Giese, N., Hetze, K., and Goodman, J. 2012. “Sustainability Reporting in the German Banking Sector During the Financial Crisis”, International Journal of Innovation and Sustainable Development, 6(2), 184–218.
  • Ivashina, V., and Scharfstein, D. 2010. “Bank Lending During the Financial Crisis of 2008”, Journal of Financial Economics, 97(3), 319–338.
  • Kashyap, A., and Stein, J. 2000. “What do a Million Observations on Banks Say About the Transmission of Monetary Policy?”, The American Economic Review, 90, 407–428.
  • Khan, M., and Watts, R.L. 2009. “Estimation and Empirical Properties of a Firm-Year Measure of Accounting Conservatism”, Journal of Accounting and Economics, 48 (2/3), 132–150.
  • Kishan, R.P. and Opiela, T.P. 2006. “Bank Capital and Loan Asymmetry in the Transmission of Monetary Policy”, Journal of Banking and Finance, 30, 259–285.
  • Kothari, S.P. 2001. “Capital Markets Research in Accounting”, Journal of Accounting and Economics, 31(1–3), 105–231.
  • Lim, C.Y., Lee, E., Kausar, A., and Walker, M. 2014. “Bank Accounting Conservatism and Bank Loan Pricing”, Journal of Accounting and Public Policy, 33(3), 260-278. Liu, C., and Ryan, S.G. 1995. “The Effect of Bank Loan Portfolio Composition on the Market Reaction to and Anticipation of Loan Loss Provisions”, J. Account. Res., 33(1), 77–94.
  • Nichols, D.C., Wahlen, J. M., and Wieland, M.M. 2009. “Publicly Traded Versus Privately Held: Implications for Conditional Conservatism in Bank Accounting”, Rev. Account Stud., 14, 88-122.
  • Sanchez, I.D., Munoz, M.I., and Conesa, I.M. 2014. Accounting Conservatism in Spanish Banks and the Drop in the Supply of Loans During the Financial Crisis, Santander: Editorial de la Universidad de Cantabria, D.I. Cuadernos de investigacion UCEIF; 11.
  • Shawn, H., Kim, Y.W., and Jung, J.G. 2019. “Company’s Sustainability and Accounting Conservatism: Firms Delisting from KOSDAQ”, Sustainability (Switzerland), 11(6), 1–17.
  • Sterling, R.R. 1967. “Conservatism: The Fundamental Principle of Valuation in Traditional Accounting”, Abacus, 3(2), 109–132.
  • Watts, R.L. 2003a. “Conservatism in Accounting - Part II: Evidence and Research Opportunities”, Accounting Horizons, 17(4), 287–301.
  • Watts, R.L. 2003b. “Conservatism in Accounting Part I: Explanations and Implications”, Accounting Horizons, 17(3).
  • Wyplosz, C. 2012. The Eurozone in the Global Financial Crisis. Oxford University Press.

DEĞİŞİM DÖNEMLERİNDE MUHASEBEDE İHTİYATLILIK VE SÜRDÜRÜLEBİLİRLİK RAPORLAMASI: TÜRK BANKACILIK SEKTÖRÜNDEN KANITLAR

Year 2021, Volume: 23 - Special Issue of MODAV's 17th International Conference on Accounting, 1 - 23, 28.03.2021
https://doi.org/10.31460/mbdd.841329

Abstract

Bu çalışma Türk bankacılık sektöründe muhasebe ihtiyatlılığını iki açıdan incelemektedir. Bunlar kredi politikaları ve sürdürülebilirlik raporlaması olarak ifade edilebilir. Çalışma, ilk olarak kriz dönemlerinde muhasebe ihtiyatlılığının, bankaların kredi verme kabiliyetlerini olumlu etkileyip etkilemediğini incelemektir. Temel varsayımımız daha yüksek koşullu muhafazakarlık düzeyinin finansal krizlerin bankaların borç verme kapasitesi üzerindeki olumsuz etkisini azaltabileceğidir. Ampirik araştırma kapsamında, öngörülerimiz 32 mevduat bankasının dengesiz panel verileriyle 1999-2019 döneminde test edilmiştir. Bu çalışmada ayrıca, bankaların sürdürülebilirlik performansına verdikleri önemin ve bu alandaki raporlamanın bilgi asimetrisini azaltarak dış paydaşların ihtiyatlılık talebi üzerindeki etkisi incelenmektir. Çalışmamızın bu kısmında bankaların muhasebe ihtiyatlılık seviyelerinin sürdürülebilirlik raporlamasına başlamasıyla birlikte değişip değişmediği test edilmiştir. Araştırma sonuçlarımız öngörülerimizle tutarlıdır ve ampirik literatürdeki mevcut kanıtları tamamlar ve destekler niteliktedir. Böylece koşullu ihtiyatlı muhasebe politikalarının banka kredilerinin arzı üzerindeki olumlu etkisi kanıtlanmaktadır. İkinci hipotezlerimizi test ettiğimizde, önceki araştırmalar ve öngörülerimizle tutarlı olmayan sonuçlar elde edilmiş, sürdürülebilirlik raporlaması ile muhafazakarlık düzeyi arasında bağlantı tespit edilememiştir.

Project Number

18.102.003

References

  • Balakrishnan, K., Watts, R., and Zuo, L. 2016. “The Effect of Accounting Conservatism on Corporate Investment During the Global Financial Crisis”, Journal of Business Finance and Accounting, 43(5) and (6), 513-542.
  • Ball, R., Kothari, S.P., and Robin, A. 2000. “The Effect of International Institutional Factors on Properties of Accounting Earnings”, Journal of Accounting and Economics, 29, 1-51.
  • Ball, Ray, and Shivakumar, L. 2005. “Earnings Quality in UK Private Firms: Comparative Loss Recognition Timeliness”, Journal of Accounting and Economics, 39(1), 83–128.
  • Basu, S. 1997. “The Conservatism Principle and the Asymmetric Timeliness of Earnings”, Journal of Accounting and Economics, 24, 3–37.
  • BDDK, Bankacılık Düzenleme ve Denetleme Kurumu. 2001. https://www.bddk.org.tr/Duyurular/Bankacilik-sektoru-yeniden-yapilandirma-programi/9. Bankacılık Sektörü Yeniden Yapılandırma Programı. (Access Date: 15.09.2020).
  • Beatty, A., and Liao, S. 2011. “Do Delays in Expected Loss Recognition Affect Banks’ Willingness to Lend?”, Journal of Accounting and Economics, 52, 1–20.
  • Bernanke, B., and Lown, C. 1991. “The Credit Crunch”, Brookings Papers on Economic Activity, 2, 205-247.
  • Brei, M., and Schclarek, A. 2013. “Public Bank Lending in Times of Crisis”, Journal of Financial Stability, 9(4), 820–830.
  • Bruno, B., D’Onofrio, A., and Marino, I. 2018. Determinants of Bank Lending in Europe and the United States: Evidence From Crisis and Post-Crisis Years. Oxford University Press.
  • Buallay, A., Fadel, S.M., Alajmi, J., and Saudagaran, S. 2020. “Sustainability Reporting and Bank Performance After Financial Crisis: Evidence From Developed and Developing Countries”, Competitiveness Review. Vol. DOI: 10.1108/CR-04-2019-0040.
  • Burke, Q.L., Chen, P.C., and Lobo, G.J. 2020. “Is Corporate Social Responsibility Performance Related to Conditional Accounting Conservatism?”, Accounting Horizons, 34(2), 19–40.
  • Carlson, M., Shan, H., and Warusawitharana, M. 2013. “Capital Ratios and Bank Lending: A Matched Bank Approach”, Journal of Financial Intermediation, 22, 663-687.
  • Cheng, C.L., and Kung, F.H. 2016. “The Effects of Mandatory Corporate Social Responsibility Policy on Accounting Conservatism”, Review of Accounting and Finance, 15(1), 2–20.
  • Cho, S.Y., Kang, P.K., Lee, C., and Park, C.K. 2020. “Financial Reporting Conservatism and Voluntary CSR Disclosure”, Accounting Horizons, 34(2), 63–82.
  • García-Benau, M.A., Sierra-Garcia, L., and Zorio, A. 2013. “Financial Crisis Impact on Sustainability Reporting”, Management Decision, 51(7), 1528–1542.
  • Hellman, N. 2008. “Accounting Conservatism Under IFRS”, Accounting in Europe, 5(2), 71–100.
  • Herzig, C., Giese, N., Hetze, K., and Goodman, J. 2012. “Sustainability Reporting in the German Banking Sector During the Financial Crisis”, International Journal of Innovation and Sustainable Development, 6(2), 184–218.
  • Ivashina, V., and Scharfstein, D. 2010. “Bank Lending During the Financial Crisis of 2008”, Journal of Financial Economics, 97(3), 319–338.
  • Kashyap, A., and Stein, J. 2000. “What do a Million Observations on Banks Say About the Transmission of Monetary Policy?”, The American Economic Review, 90, 407–428.
  • Khan, M., and Watts, R.L. 2009. “Estimation and Empirical Properties of a Firm-Year Measure of Accounting Conservatism”, Journal of Accounting and Economics, 48 (2/3), 132–150.
  • Kishan, R.P. and Opiela, T.P. 2006. “Bank Capital and Loan Asymmetry in the Transmission of Monetary Policy”, Journal of Banking and Finance, 30, 259–285.
  • Kothari, S.P. 2001. “Capital Markets Research in Accounting”, Journal of Accounting and Economics, 31(1–3), 105–231.
  • Lim, C.Y., Lee, E., Kausar, A., and Walker, M. 2014. “Bank Accounting Conservatism and Bank Loan Pricing”, Journal of Accounting and Public Policy, 33(3), 260-278. Liu, C., and Ryan, S.G. 1995. “The Effect of Bank Loan Portfolio Composition on the Market Reaction to and Anticipation of Loan Loss Provisions”, J. Account. Res., 33(1), 77–94.
  • Nichols, D.C., Wahlen, J. M., and Wieland, M.M. 2009. “Publicly Traded Versus Privately Held: Implications for Conditional Conservatism in Bank Accounting”, Rev. Account Stud., 14, 88-122.
  • Sanchez, I.D., Munoz, M.I., and Conesa, I.M. 2014. Accounting Conservatism in Spanish Banks and the Drop in the Supply of Loans During the Financial Crisis, Santander: Editorial de la Universidad de Cantabria, D.I. Cuadernos de investigacion UCEIF; 11.
  • Shawn, H., Kim, Y.W., and Jung, J.G. 2019. “Company’s Sustainability and Accounting Conservatism: Firms Delisting from KOSDAQ”, Sustainability (Switzerland), 11(6), 1–17.
  • Sterling, R.R. 1967. “Conservatism: The Fundamental Principle of Valuation in Traditional Accounting”, Abacus, 3(2), 109–132.
  • Watts, R.L. 2003a. “Conservatism in Accounting - Part II: Evidence and Research Opportunities”, Accounting Horizons, 17(4), 287–301.
  • Watts, R.L. 2003b. “Conservatism in Accounting Part I: Explanations and Implications”, Accounting Horizons, 17(3).
  • Wyplosz, C. 2012. The Eurozone in the Global Financial Crisis. Oxford University Press.
There are 30 citations in total.

Details

Primary Language English
Subjects Business Administration
Journal Section MAIN SECTION
Authors

İdil Kaya 0000-0002-9171-5989

Destan Halit Akbulut 0000-0002-0705-9553

Project Number 18.102.003
Publication Date March 28, 2021
Submission Date December 15, 2020
Published in Issue Year 2021 Volume: 23 - Special Issue of MODAV's 17th International Conference on Accounting

Cite

APA Kaya, İ., & Akbulut, D. H. (2021). ACCOUNTING CONSERVATISM AND SUSTAINABILITY REPORTING IN CHANGING TIMES: EVIDENCE FROM TURKISH BANKING INDUSTRY. Muhasebe Bilim Dünyası Dergisi, 23, 1-23. https://doi.org/10.31460/mbdd.841329