206 0266 1 bankenv n 0458 0237 0030 0367 0224 0202

0.206***
-
0.266***
1
BANK_ENV
N
-
0.458***
0.237***
0.030***
0.367***
-
0.224***
-
0.202***
-
0.083***
0.019***
-
0.055***
-
0.298***
0.406***
0.338***
0.039***
1
MONITOR_INDEX
O
0.075***
0.012**
0.013**
-
0.130***
-
0.063***
-
0.057***
0.022***
-
0.011*
-
0.144***
-
0.152***
0.281***
0.328***
0.063***
0.221***
1
The table provides descriptive statistics (mean values) for variables used in the loss-avoidance and just-meet-or-beat test at the country level. Definitions of the variables are provided in Appendix
1
12
The marginal effect per standard deviation (SD) change for a
religious variable is computed as p 9 (1 - p ) 9 b 9 SD, where p is
the base rate (0.11) and b is the estimated coefficient from the logistic
regression (Liao 1994 ).
286 K. Kanagaretnam et al.
123

banks to avoid losses or to just-meet-or-beat prior year’s
earnings.
With regard to the bank-level controls, we that find
highly leveraged banks and banks with a high level of loan
loss allowance are less likely to manage earnings to avoid
losses or to just-meet-or-beat prior year’s earnings.
Regarding the country-level institutional controls, we find
that rule of law ( RULE_LAW ) is negatively associated with
loss avoidance, whereas bank environment ( BANK_ENV )
and monitoring ( MONITOR_INDEX ) are positively asso-
ciated with loss avoidance.
Income-Increasing Abnormal LLP Tests
Table 5 shows the descriptive statistics and correlations of
variables used in the abnormal LLP tests. The descriptive
statistics for variables used in the regression are reported in
Panel A. Panel B shows the correlations among the bank-
specific variables used in the regression. As expected,
RELIGIOSITY and income-increasing abnormal LLP are
negatively correlated.
Panel A of Table 6 reports the results of the first-stage
regression for estimating abnormal LLP. Consistent with
prior studies (e.g., Wahlen 1994 ; Kanagaretnam et al. 2004 ,
2010b ), LCO , LOANS and BEGNPL and CHNPL are pos-
itively associated with LLP . The residuals from Eq. ( 2 )
represent the abnormal or discretionary component of LLP.
We are primarily interested in how religion may affect
income-increasing earnings management; hence we report,
in columns (1) and (2) of Table 6 Panel B, the regression
results for the absolute value of the negative (income-
increasing) ALLP values. If religion has an important effect
Table 4 Regression results for
loss-avoidance test and just-
meet-or-beat prior year’s
earnings test
We report the results for the
Eq. ( 1 ). The definitions for the
variables are provided in
Appendix 1 . We estimate the
regression clustered by firm and
year, and with year indicators.
To conserve space, we do not
report the coefficient estimates
for the year indicators. For each
variable, we report the
regression coefficient, followed
by the Z statistic in parentheses.
For the main variable of interest
(religion variable), we also
report the marginal effect (in
percent) in the square brackets.
The marginal effect indicates
the change in the probability of
meeting bench mark per
standard deviation change in
each respective religion variable
(holding other independent
variables constant)
* Significance at 10 % level,
two-tailed
** Significance at 5 % level,
two-tailed
*** Significance at 1 % level,
two-tailed
(1) (2) (3) (4)
LOSS_AVOID LOSS_AVOID JMBE JMBE
RELIGIOSITY - 2.677*** - 3.487*** - 0.247* - 0.309*
( - 10.30) ( - 11.96) ( - 1.80) ( - 1.89)
[ - 5.97 %] [ - 7.73 %] [ - 0.58 %] [ - 0.72 %]
SIZE - 0.040 0.016
( - 0.88)