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)
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