The impact of regulations on compliance costs, risk-taking, and reporting quality of the EU banks

Sunil Poshakwale; Daniel Aghanya; Vineet Agarwal

doi:10.1016/j.irfa.2019.101431

The impact of regulations on compliance costs, risk-taking, and reporting quality of the EU banks

Sunil Poshakwale
, Daniel Aghanya
, Vineet Agarwal

Cranfield University

Research output: Contribution to journal › Article › peer-review

14 Citations (Scopus)

703 Downloads (Pure)

Abstract

The paper examines how the Statutory Audit and Corporate Reporting Directives (SACORD) affect the compliance costs, risk taking and quality of financial reporting of the EU banks. Using a natural experiment, we find that post SACORD, both compliance costs and risk taking increase significantly. However, the implementation of additional regulations seems to be effective in terms of improved quality of financial reporting. When we analyse the impact by size, we find that smaller banks face disproportionately higher increase in compliance costs while larger banks seem to engage in greater risk taking.

Original language	English
Article number	101431
Number of pages	50
Journal	International Review of Financial Analysis
Volume	68
Early online date	14 Dec 2019
DOIs	https://doi.org/10.1016/j.irfa.2019.101431
Publication status	Published - 1 Mar 2020

Bibliographical note

NOTICE: this is the author’s version of a work that was accepted for publication in International Review of Financial Analysis. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in International Review of Financial Analysis, 68 (2020)
DOI: 10.1016/j.irfa.2019.101431

© 2019, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/

Keywords

Financial regulation
Transparency
Financial system
Financial stability
Difference-in-differences

ASJC Scopus subject areas

Economics, Econometrics and Finance(all)

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10.1016/j.irfa.2019.101431

Post-PrintAccepted author manuscript, 703 KBLicence: CC BY-NC-ND

Cite this

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title = "The impact of regulations on compliance costs, risk-taking, and reporting quality of the EU banks",

abstract = "The paper examines how the Statutory Audit and Corporate Reporting Directives (SACORD) affect the compliance costs, risk taking and quality of financial reporting of the EU banks. Using a natural experiment, we find that post SACORD, both compliance costs and risk taking increase significantly. However, the implementation of additional regulations seems to be effective in terms of improved quality of financial reporting. When we analyse the impact by size, we find that smaller banks face disproportionately higher increase in compliance costs while larger banks seem to engage in greater risk taking. ",

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KW - Transparency

KW - Financial system

KW - Financial stability

KW - Difference-in-differences

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The impact of regulations on compliance costs, risk-taking, and reporting quality of the EU banks

Abstract

Bibliographical note

Keywords

ASJC Scopus subject areas

Access to Document

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Cite this