nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2009‒12‒05
two papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Dynamic provisioning: rationale, functioning, and prudential treatment By Marco Burroni; Mario Quagliariello; Emiliano Sabatini; Vincenzo Tola
  2. Disentangling the Link Between Stock and Accounting Performance in Acquisitions By Betzer, André; Goergen, Marc; Metzger, Daniel

  1. By: Marco Burroni (Banca d'Italia); Mario Quagliariello (Banca d'Italia); Emiliano Sabatini (Banca d'Italia); Vincenzo Tola (Banca d'Italia)
    Abstract: Current policy debate has renewed interest in countercyclical provisioning policies; dynamic provisions are regarded as a valuable device for pursuing this goal. Last July, Ecofin supported “the introduction of forward-looking provisioning, which consists in constituting provisions deducted from profits in good times for expected losses on loan portfolios, and which would contribute to limiting procyclicalityâ€. This paper describes: i) how dynamic provisions work in a general framework based on expected losses; ii) how they work according to the Spanish system, which is the only real example of countercyclical provisioning; iii) the differences and similarities between the expected loss model and the Spanish approach. Building on proposals currently under discussion in the international community, it also suggests a possible way forward for introducing a system of dynamic provisions that, while meeting the prudential goal of having more conservative provisioning policies, would not clash with accounting standards.
    Keywords: dynamic provisions, capital buffers, Basel 2, credit risk, procyclicality
    JEL: G21 G28
    Date: 2009–11
  2. By: Betzer, André; Goergen, Marc (Cardiff Business School); Metzger, Daniel
    Abstract: While empirical studies that use event-study methodology find on average that the gains from mergers and acquisitions are positive, those focusing on accounting figures tend to find a significant drop in performance. We argue that each of the four possible combinations between positive or negative abnormal stock returns and accounting performance is due to a distinct acquisition motive. We find strong empirical evidence in support of this claim.
    Keywords: Mergers and acquisitions; performance measurement; synergies; preemption; overvaluation; corporate governance; agency problems
    JEL: G34 G3 G14
    Date: 2009–11

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