IDEAS home Printed from https://ideas.repec.org/a/eee/riibaf/v74y2025ics027553192400504x.html
   My bibliography  Save this article

The effect of political connections on earnings management: Evidence from ECB-supervised banks

Author

Listed:
  • Proença, Catarina
  • Augusto, Mário
  • Murteira, José

Abstract

This study examines the effect of political connections on earnings management in banks supervised by the European Central Bank (ECB). The study analyses panel data on 58 banks supervised by the European Central Bank (ECB) from 2012 to 2019, using generalized method moment (GMM). Our results suggest a non-linear U-inverted relationship between political connections and earnings management practices. When political connections are low or moderate, they tend to favor earnings management, evidencing the opportunism of politically connected directors, with reflections on discretionary earnings management. However, in boards whose members have strong political connections, this effect is negative, suggesting that directors in this situation will not resort to discretionary practices, as they consider that they will be subject to greater scrutiny and oversight. These results are generally robust when we consider alternative earnings management measures.

Suggested Citation

  • Proença, Catarina & Augusto, Mário & Murteira, José, 2025. "The effect of political connections on earnings management: Evidence from ECB-supervised banks," Research in International Business and Finance, Elsevier, vol. 74(C).
  • Handle: RePEc:eee:riibaf:v:74:y:2025:i:c:s027553192400504x
    DOI: 10.1016/j.ribaf.2024.102711
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S027553192400504X
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.ribaf.2024.102711?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Earnings management; Political connections; Banks;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance
    • G4 - Financial Economics - - Behavioral Finance
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:riibaf:v:74:y:2025:i:c:s027553192400504x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ribaf .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.