The effect of earnings management on bank efficiency

Authors

  • Mohd Fahmee Ab-Hamid Universiti Kebangsaan Malaysia http://orcid.org/0000-0003-3514-092X
  • Rozilee Asid Universiti Malaysia Sabah
  • Nor Fatimah Che Sulaiman Universiti Malaysia Terengganu
  • Wan Farisan Wan Sulaiman Ministry of Finance Malaysia
  • Elya Nabila Abdul Bahri Universiti MAHSA

DOI:

https://doi.org/10.17576/AJAG-2018-10-07

Keywords:

Bank, Cost efficiency, SFA, Earnings management, ASEAN

Abstract

This paper studies the effects of earnings management practices on bank cost efficiency using banks in five ASEAN countries over the period 1989–2015. By employing Stochastic Frontier Analysis technique for cost efficiency, we find that each country has different efficiency level. Using panel data analysis, we further find that the increase in earnings management practices reduces the bank's efficiency significantly. The findings suggest that the banking supervisors and managers should formulate strategies that focus on the cost efficiency–related initiatives and manages the earnings management practices. With the strategies in place, it could facilitate the economic integration between ASEAN countries.

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Published

2018-11-03

Issue

Vol. 10 (2018)

Section

Articles

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