Loan loss provisions, earnings management and capital management under IFRS:the case of EU commercial banks

Prior research has shown that loan loss provisions are primarily used as a tool for earnings management and capital management by listed banks. Effective 2005 all listed companies in the European Union (EU) are required to comply with International Financial Reporting Standards (IFRS). Adherence to IFRS, it is claimed, should enhance transparency of reporting practices relative to local General Accepted Accounting Principles (GAAP). The overall objective of this paper is to examine the impact of the implementation of IFRS on the use of loan loss provisions (LLPs) to manage earnings and capital. We use a sample of 91 EU listed commercial banks covering a period of 10 years (before and after implementation of IFRS). Since early adopters may have different incentives and motivations relative to those who adopt mandatorily, we dichotomize our sample into early and late adopters. Overall, we find that earnings management (using loan loss provisions) for both early and late adopters while significant over the estimation window is significantly reduced after implementation of IFRS. We also find that, for risky banks, earnings management behavior is more pronounced when compared to the less risky banks, but is significantly reduced in the post IFRS period. Capital management behavior by bank managers is not significant in both pre and post IFRS regimes. Overall, we conclude that the implementation of IFRS in the EU appears to have improved earnings quality by mitigating the tendency of bank managers of listed commercial banks to engage in earnings management using loan loss provisions.

Entrepreneurship, social capital, and institutions:social and commercial entrepreneurship across nations

We model and test the relationship between social and commercial entrepreneurship drawing on social capital theory. We propose that the country prevalence rate of social entrepreneurship is an indicator of constructible nation-level social capital and enhances the likelihood of individual commercial entry. We further posit that both social and commercial entrepreneurial entry is facilitated by certain formal institutions, namely strong property rights and (low) government activism, albeit the latter impacts each of these types of entrepreneurship differently. We apply bivariate discrete choice multilevel modeling to population-representative samples in 47 countries and find support for these hypotheses. © 2013 Baylor University.

Human capital in social and commercial entrepreneurship

We advance research on human capital and entrepreneurial entry and posit that, in order to generate value, social entrepreneurship requires different configurations of human capital than commercial entrepreneurship. We develop a multilevel framework to analyse the commonalities and differences between social and commercial entrepreneurship, including the impact of general and specific human capital, of national context and its moderating effect on the human capital-entrepreneurship relationship. We find that specific entrepreneurial human capital is relatively more important in commercial entrepreneurship, and general human capital in social entrepreneurship, and that the effects of human capital depend on the rule of law.

Rough-terrain groundspeed measurement:a radar-based commercial solution

Off-highway motive plant equipment is costly in capital outlay and maintenance. To reduce these overheads and increase site safety and workrate, a technique of assessing and limiting the velocity of such equipment is required. Due to the extreme environmental conditions met on such sites, conventional velocity measurement techniques are inappropriate. Ogden Electronics Limited were formed specifically to manufacture a motive plant safety system incorporating a speed sensor and sanction unit; to date, the only such commercial unit available. However, problems plague the reliability, accuracy and mass production of this unit. This project assesses the company's exisiting product, and in conjunction with an appreciation of the company history and structure, concludes that this unit is unsuited to its intended application. Means of improving the measurement accuracy and longevity of this unit, commensurate with the company's limited resources and experience, are proposed, both for immediate retrofit and for longer term use. This information is presented in the form of a number of internal reports for the company. The off-highway environment is examined; and in conjunction with an evaluation of means of obtaining a returned signal, comparisons of processing techniques, and on-site gathering of previously unavailable data, preliminary designs for an alternative product are drafted. Theoretical aspects are covered by a literature review of ground-pointing radar, vehicular radar, and velocity measuring systems. This review establishes and collates the body of knowledge in areas previously considered unrelated. Based upon this work, a new design is proposed which is suitable for incorporation into the existing company product range. Following production engineering of the design, five units were constructed, tested and evaluated on-site. After extended field trials, this design has shown itself to possess greater accuracy, reliability and versatility than the existing sensor, at a lower unit cost.

Founders' human capital and the performance of UK new technology based firms

This paper investigates the role of entrepreneurs' general and specific human capital on the performance of UK new technology based firms using a resource based approach to the entrepreneurship theory. The effect of entrepreneurial human capital on the performance of NTBFs is investigated using data derived from a survey of 412 firms operating in both high-tech manufacturing and the services sectors. According to the resource based theory it is found that specific human capital is more important for the performance of NTBFs in relation to general. More specifically individual entrepreneurs or entrepreneurial teams with high levels of formal business education, commercial, managerial or same sector experience are found to have created better performing NTBFs. Finally it is found that the performance of a NTBF can improve through the combination of heterogeneous but complementary skills, including, for example, technical education and commercial experience or managerial technical and managerial commercial experience. © 2010 Springer Science+Business Media, LLC.