CONSERVATISM IN ACCOUNTING EARNINGS IN BRAZILIAN BANKS:
DOI:
https://doi.org/10.4270/ruc.20128Keywords:
Accounting, Conditional Conservatism, Banks, Legal Exposure.Abstract
We study conditional conservatism in earnings reported by Brazilian financial institutions. We expected that conditional conservatism is differentiated concerning state-owned and private banks. Basu (1997) earnings transitory components reversion model and Ball and Shivakumar (2005) accruals-based model were applied to test the conditional conservatism hypothesis of Brazilian banks reported earnings. We also tested evidences that Brazilian state-owned banks reported earnings are more conservative than Brazilian private banks reported earnings. Data embedded 260 banks from 1997 to 2010. Regression coefficients were obtained from estimators based on GMM System to deal with endogeneity regressores problem. Although Brazilian economic and institutional environment does not stimulate accounting informational quality, findings evidences rejected the first research hypothesis. Furthermore state-owned banks managers asymmetrically anticipate expected losses recognition, reporting more conservative earnings, aiming probably to reduce litigation risk exposure with government agencies. So, these evidences did not reject the second research hypothesis.
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