Strategic usefulness of ignorance: evidence from income smoothing via retained interest of securitized loans

被引：0
作者：
Emre Kilic
Gerald Lobo
Tharindra Ranasinghe
Lin Yi
机构：
[1] University of Houston,Bauer College of Business
[2] American University,Kogod School of Business
[3] University of Houston – Clear Lake,College of Business
来源：
Review of Quantitative Finance and Accounting | 2021年 / 56卷
关键词：
Strategic ignorance; Income smoothing; Loan loss provisions; Securitization; Seller’s interest loans; M41; G21; D91;
D O I：
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中图分类号：
学科分类号：
摘要：
This paper examines the notion of strategic ignorance in an earnings management context. Managers possess less information about loans subjected to securitization and auditors are aware of this shortcoming. Consistent with managers exploiting their own ignorance strategically and using loan loss provisions (LLP) of retained seller’s interest of securitized loans (SIL) more for earnings management than LLP of other loans, we find the use of LLP for income smoothing to be greater for banks that hold SIL. Moreover, the propensity to smooth income via LLP is increasing in the ratio of SIL to total loans. We also find that SIL is particularly useful for income smoothing in the fourth quarter, when greater auditor scrutiny makes it more difficult to manage earnings via LLP of non-securitized loans.
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页码：245 / 272
页数：27
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