Accrual Quality Assessment Model in Banking Industry

Document Type : Original Article

Authors
Gholamhossein Assadi 1
Bahador Nayebi 2
1 Associate Prof., Faculty of Management & Accounting, Shahid Beheshti University, Tehran, Iran
2 Ph.D. Student in Accounting, University of Tehran – Kish International Campus, Iran (Corresponding author)
Abstract
This paper provides a new categorization of balance sheet items for commercial banks by putting them in to financial and operational parts. Results of the study shows that banks with higher net financial assets compared to net operational assets have less incentives for earnings management, which results in higher accruals quality. Furthermore, we have studied the role of loan contract types and capital adequacy on accruals quality. The results show that banks with higher share of fixed-income loan contracts and higher capital adequacy ratio have a better quality of accruals. We also found out that banks which give loans to corporations of leading industries, have less earning management actions, which leads to higher accruals quality. Based on this finding, we have developed a future-looking measure of accruals quality for banks focused on industries which banks put higher portion of the loans on and called it Portfolio Quality Index (PQI).
 
 
Keywords
Banks’ Balance Sheet Categorization
Accruals Quality
Capital Adequacy
Loan Contract
Future-based Earning Management Model
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