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Macroprudential Policies and their Impact on Bank Earnings Management

Author

Listed:
  • Jie Cui

    (Dongbei University of Finance and Economics)

  • Mamiza Haq

    (Newcastle University Business School)

  • Steven Ongena

    (University of Zurich - Department Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR))

  • Eric K. M. Tan

    (University of Queensland)

Abstract

We investigate the impact of macroprudential policies on bank earnings management, analysing data from individual banks across 68 countries between 1996 and 2019. Our findings indicate that macroprudential policies exert differential effects on earnings quality and opportunistic earnings management. On average, tightening policies related to bank capital and loan supply result in an 8% reduction in earnings quality, while concurrently decreasing earnings management by approximately 2.5%. Moreover, the easing of macroprudential policies appears to have a more pronounced impact on earnings management than on earnings quality. The results remain robust to endogeneity checks and subsample analyses, and hold across various model specifications. Overall, our findings emphasize the importance of balanced macroprudential policies to at once address information asymmetries, regulatory arbitrage, and agency issues, and to promote financial stability.

Suggested Citation

  • Jie Cui & Mamiza Haq & Steven Ongena & Eric K. M. Tan, 2025. "Macroprudential Policies and their Impact on Bank Earnings Management," Swiss Finance Institute Research Paper Series 25-33, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2533
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    More about this item

    Keywords

    macroprudential policies; opportunistic earnings management; earnings quality; cross-country analysis;
    All these keywords.

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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