Table 8.
Earnings management truncated regression with additional control variables.
| Truncated Regression | |||||||
|---|---|---|---|---|---|---|---|
| Size |
Region |
||||||
| Variable | ALL | Big | Small | Africa | Europe | Middle East | Asia |
| Intercept | 0.877*** | 0.882*** | 0.856*** | 0.931*** | 0.864*** | 0.811*** | 0.864*** |
| (0.010) | (0.016) | (0.029) | (0.030) | (0.041) | (0.020) | (0.037) | |
| Loan Loss Provision | -0.038* | 0.019 | -0.043* | 0.412*** | -0.032* | -0.339*** | -0.303* |
| (0.016) | (0.039) | (0.019) | (0.066) | (0.016) | (0.093) | (0.125) | |
| Loan Loss Reserves | -0.026*** | -0.061*** | -0.018** | -0.136*** | -0.004 | -0.103** | -0.035** |
| (0.005) | (0.015) | (0.007) | (0.027) | (0.006) | (0.036) | (0.011) | |
| Ln Total Assets | -0.004*** | -0.005*** | -0.005** | -0.009*** | -0.001 | -0.007*** | -0.004** |
| (0.001) | (0.001) | (0.002) | (0.001) | (0.001) | (0.001) | (0.001) | |
| Net Income Growth | -0.000 | -0.000** | 0.000 | 0.000 | -0.000 | -0.000 | -0.002*** |
| (0.000) | (0.000) | (0.000) | (0.000) | (0.000) | (0.000) | (0.000) | |
| Total Liabilities | 0.002 | 0.017 | -0.048*** | -0.073*** | 0.003 | 0.124*** | -0.040* |
| (0.007) | (0.013) | (0.014) | (0.015) | (0.014) | (0.014) | (0.019) | |
| Inflation | -0.001** | -0.001* | -0.002 | -0.000 | -0.003** | -0.000 | -0.004*** |
| (0.000) | (0.000) | (0.001) | (0.001) | (0.001) | (0.001) | (0.001) | |
| GDP growth | 0.001* | 0.000 | 0.003** | -0.001 | 0.001 | -0.001 | -0.000 |
| (0.000) | (0.000) | (0.001) | (0.002) | (0.001) | (0.001) | (0.002) | |
| ROA | 0.117*** | 0.337*** | 0.091* | 0.615*** | 0.071* | 0.383* | 0.091 |
| (0.028) | (0.061) | (0.036) | (0.080) | (0.030) | (0.154) | (0.120) | |
| Rule of Law | 0.001 | -0.011 | 0.028 | 0.004 | -0.029 | -0.005 | 0.038* |
| (0.008) | (0.007) | (0.020) | (0.029) | (0.016) | (0.020) | (0.015) | |
| Regulatory Quality | -0.004 | 0.024* | -0.027 | -0.016 | 0.011 | -0.022 | -0.051 |
| (0.010) | (0.010) | (0.023) | (0.040) | (0.021) | (0.023) | (0.034) | |
| Change in Loan Losses | -0.016 | 0.015 | -0.017 | 0.085 | -0.008 | 0.020 | 0.204 |
| (0.017) | (0.058) | (0.020) | (0.097) | (0.016) | (0.182) | (0.181) | |
| CFEER | -0.847*** | -1.670*** | -0.607*** | -1.604*** | -2.006*** | -0.560*** | -0.211 |
| (0.046) | (0.075) | (0.066) | (0.143) | (0.140) | (0.059) | (0.292) | |
| Year Dummies | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Country Dummies | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Adj. R2 | 0.2147 | 0.3169 | 0.2121 | 0.3462 | 0.1461 | 0.2262 | 0.1909 |
| Observations | 2557 | 1748 | 809 | 458 | 857 | 516 | 726 |
Note: The p-value denotes significance at three levels: 0.05*, 0.01**, and 0.001***. Inflation data and GDP growth figures source from the World Bank for 2011 - 2018. ROA is the ratio of net income to average total assets. Rule of law sourced from World Bank and captures perceptions of the extent to which agents have confidence in and abide by the rules of society. Scores are collected annually for each year and range from -2.5 to 2.5. Regulatory Quality captures perceptions of the ability of the government to formulate and implement sound policies and regulations that permit and promote private sector development. Annual data is sourced from the World bank and range from -2.5 to 2.5. Change in Loan Losses is the ratio of change in loan losses to total assets. CFEE is the ratio of commission and fee income to total assets. The Americas region has been excluded from the table as the combined effect of a small sample size and control variables has led to indeterminate dependent values for a large number of variables.