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Competition or manipulation? An empirical evidence of determinants of the earnings persistence of the U.S. banks

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  • Hung, Chi-Hsiou D.
  • Jiang, Yuxiang
  • Liu, Frank Hong
  • Tu, Hong

Abstract

We examine the impact of competition on bank earnings persistence by exploiting a natural experiment following interstate banking deregulation that increased bank competition. We find that bank earnings adjustment speed increases after their states implement the deregulation. This relationship is weakened, however, with the increase of bank's abilities to sustain earnings, as reflected in size, diversification, managerial efficiency and safety. We further find that the impact of compeititon on bank earnings adjustment speed is direct but not indirectly through the channel of earnings management.

Suggested Citation

  • Hung, Chi-Hsiou D. & Jiang, Yuxiang & Liu, Frank Hong & Tu, Hong, 2018. "Competition or manipulation? An empirical evidence of determinants of the earnings persistence of the U.S. banks," Journal of Banking & Finance, Elsevier, vol. 88(C), pages 442-454.
    • Handle: RePEc:eee:jbfina:v:88:y:2018:i:c:p:442-454
    DOI: 10.1016/j.jbankfin.2018.01.010
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    More about this item

    Keywords

    Competition; Geographic expansion index; Earnings persistence; Earnings adjustment speed; Earnings management;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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