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Does the Change in Accounting Requirements on Banks Affect Borrowers' Earnings Management? Evidence from FAS 166/167

Suntina Sun Orcid Logo, Wei Song, Qingjing Zhang, Zhuang Zhang

Review of Quantitative Finance and Accounting, Volume: forthcoming

Swansea University Author: Suntina Sun Orcid Logo

Abstract

We examine whether and how changes in bank accounting standards influence borrowers’ earnings management activities. Exploiting the implementation of FAS 166/167, which required banks to consolidate previously off-balance-sheet securitized assets, we find that borrowing firms increase their use of a...

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Published in: Review of Quantitative Finance and Accounting
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URI: https://cronfa.swan.ac.uk/Record/cronfa71893
first_indexed 2026-05-13T16:01:35Z
last_indexed 2026-05-15T05:41:58Z
id cronfa71893
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spelling 2026-05-14T15:00:40.6433358 v2 71893 2026-05-13 Does the Change in Accounting Requirements on Banks Affect Borrowers' Earnings Management? Evidence from FAS 166/167 2e8f85688626fa70d0386d0ccba4a30c 0000-0002-5056-9639 Suntina Sun Suntina Sun true false 2026-05-13 CBAE We examine whether and how changes in bank accounting standards influence borrowers’ earnings management activities. Exploiting the implementation of FAS 166/167, which required banks to consolidate previously off-balance-sheet securitized assets, we find that borrowing firms increase their use of accrual-based earnings management following the reform. This effect is notably stronger among borrowers with greater financing needs and higher information opacity. Overall, our study documents a previously underexplored spillover effect of bank accounting reforms on borrowers’ accounting practices and underscores the importance of considering possible borrower-level responses when evaluating future accounting reforms in the banking sector. Journal Article Review of Quantitative Finance and Accounting forthcoming 0 0 0 0001-01-01 COLLEGE NANME Management School COLLEGE CODE CBAE Swansea University Not Required 2026-05-14T15:00:40.6433358 2026-05-13T14:59:07.0412000 Faculty of Humanities and Social Sciences School of Management - Accounting and Finance Suntina Sun 0000-0002-5056-9639 1 Wei Song 2 Qingjing Zhang 3 Zhuang Zhang 4
title Does the Change in Accounting Requirements on Banks Affect Borrowers' Earnings Management? Evidence from FAS 166/167
spellingShingle Does the Change in Accounting Requirements on Banks Affect Borrowers' Earnings Management? Evidence from FAS 166/167
Suntina Sun
title_short Does the Change in Accounting Requirements on Banks Affect Borrowers' Earnings Management? Evidence from FAS 166/167
title_full Does the Change in Accounting Requirements on Banks Affect Borrowers' Earnings Management? Evidence from FAS 166/167
title_fullStr Does the Change in Accounting Requirements on Banks Affect Borrowers' Earnings Management? Evidence from FAS 166/167
title_full_unstemmed Does the Change in Accounting Requirements on Banks Affect Borrowers' Earnings Management? Evidence from FAS 166/167
title_sort Does the Change in Accounting Requirements on Banks Affect Borrowers' Earnings Management? Evidence from FAS 166/167
author_id_str_mv 2e8f85688626fa70d0386d0ccba4a30c
author_id_fullname_str_mv 2e8f85688626fa70d0386d0ccba4a30c_***_Suntina Sun
author Suntina Sun
author2 Suntina Sun
Wei Song
Qingjing Zhang
Zhuang Zhang
format Journal article
container_title Review of Quantitative Finance and Accounting
container_volume forthcoming
institution Swansea University
college_str Faculty of Humanities and Social Sciences
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hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Accounting and Finance{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Accounting and Finance
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description We examine whether and how changes in bank accounting standards influence borrowers’ earnings management activities. Exploiting the implementation of FAS 166/167, which required banks to consolidate previously off-balance-sheet securitized assets, we find that borrowing firms increase their use of accrual-based earnings management following the reform. This effect is notably stronger among borrowers with greater financing needs and higher information opacity. Overall, our study documents a previously underexplored spillover effect of bank accounting reforms on borrowers’ accounting practices and underscores the importance of considering possible borrower-level responses when evaluating future accounting reforms in the banking sector.
published_date 0001-01-01T07:04:17Z
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score 11.106755

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