A Statistical Analysis of the Effects of the Strengthening of Accounting and Auditing Standards on the Financial Soundness of Banks

Year 2021, Volume: 20 Issue: 2, 480 - 492, 27.04.2021

İsmail Cem Ay , Ayşe Atılgan Sarıdoğan , Nabı Küçükgergerli

https://doi.org/10.21547/jss.871425

Abstract

Financial soundness of banks is vital not only for the firms but also countries in order to achieve sustainable economic development and the welfare of the society. There are many factors affecting financial soundness of banks both firm level and country level. In this study, it is tested whether strengthen auditing and accounting standards affects the soundness of banks or not for the 140 countries by using Kruskal-Wallis test. According to the Kruskal-Wallis test results, it can be argued that as auditing and accounting standards strengthens then financial soundness of banks rise. As a result, it can be concluded that the banking sector and the countries should give great importance to strengthen auditing and accounting standards in order to achieve better financial soundness of banks and sustainable economic development.

Keywords

bankacılık, Mali Sağlamlık, Muhasebe ve Denetim Standartları

References

• Albulescu, C. T. (2015). Banks’ profitability and financial soundness indicators: A macro-level investigation in emerging countries. Procedia economics and finance, 23, 203-209
• Arora, A., & Kohli, H. K. (2016). Soundness Indicators of Public and Private Sector Banks: A Comparative Study. Vinimaya, 37(1), 4
• Ashraf, A., & Tariq, Y. B. (2016). Evaluating the Financial Soundness of Banks: An Application of Bankometer on Pakistani Listed Banks. IUP Journal of Financial Risk Management, 13(3), 47.
• Babihuga, R. (2007). Macroeconomic and financial soundness indicators: An empirical investigation (No. 7-115). International Monetary Fund.
• Barth, J. R., Dopico, L. G., Nolle, D. E., & Wilcox, J. A. (2002). Bank safety and soundness and the structure of bank supervision: a cross‐country analysis. International Review of Finance, 3(3‐4), 163-188.
• Bourkhis, K., & Nabi, M. S. (2013). Islamic and conventional banks' soundness during the 2007–2008 financial crisis. Review of Financial Economics, 22(2), 68-77.
• Charitou, M. (2019). Which profitability Measures Explain Better the Bank’s Financial Soundness?. Journal of Finance and Economics, 7(2), 62-67.
• Čihák, M., & Hesse, H. (2010). Islamic banks and financial stability: An empirical analysis. Journal of Financial Services Research, 38(2-3), 95-113.
• Demirgüç-Kunt, A., & Detragiache, E. (2011). Basel Core Principles and bank soundness: Does compliance matter?. Journal of Financial Stability, 7(4), 179-190.
• Doumpos, M., Gaganis, C., & Pasiouras, F. (2015). Central bank independence, financial supervision structure and bank soundness: An empirical analysis around the crisis. Journal of Banking & Finance, 61, S69-S83.
• Evans, O., Leone, A. M., Gill, M., Hilbers, P., Blaschke, W., Krueger, R., ... & Berge, J. T. (2000). Macroprudential indicators of financial system soundness. IMF Occasional Paper 192
• Fatima, N. (2014). Capital Adequacy: A Financial Soundness Indicator for Banks. Global Journal of Finance and Management, 6(8), 771-776.
• Hilbers, P., Krueger, R., & Moretti, M. (2000). New tools for assessing financial system soundness. Finance and Development, 37(3), 52-55
• Gasbarro, D., Sadguna, I. G. M., & Zumwalt, J. K. (2002). The changing relationship between CAMEL ratings and bank soundness during the Indonesian banking crisis. Review of Quantitative Finance and Accounting, 19(3), 247-260.
• Fernández-Arias, D., López-Martín, M., Montero-Romero, T., Martínez-Estudillo, F., & Fernández-Navarro, F. (2018). Financial Soundness Prediction Using a Multi-classification Model: Evidence from Current Financial Crisis in OECD Banks. Computational Economics, 52(1), 275-297.
• Jurevičienė, D., & Skvarciany, V. (2016). CAMELS+ T approach for banks’ soundness assessment: evidence from the Baltics. Entrepreneurship and sustainability issues, 4, 159-173.
• Keffala, M. R. (2018). Analyzing the effect of derivatives on the financial soundness of commercial banks in Italy: An approach based on the CAMELS framework. Review of Financial Economics, 36(3), 267-283.
• Klomp, J., & De Haan, J. (2015). Bank regulation and financial fragility in developing countries: Does bank structure matter?. Review of Development Finance, 5(2), 82-90.
• Lindgren, C. J., Garcia, G. G., Garcia, G. G., & Saal, M. I. (1996). Bank soundness and macroeconomic policy. International Monetary Fund.
• Masud, M., Kaium, A., & Haq, M. (2016). Financial Soundness Measurement and Trend Analysis of Commercial Banks in Bangladesh: An Observation of Selected Banks. European Journal of Business and Social Sciences.
• Michalak, T. C., & Uhde, A. (2012). Credit risk securitization and bank soundness in Europe. The Quarterly Review of Economics and Finance, 52(3), 272-285.
• Poon, W. P., Firth, M., & Fung, H. G. (1999). A multivariate analysis of the determinants of Moody’s bank financial strength ratings. Journal of International Financial Markets, Institutions and Money, 9(3), 267-283.
• Roman, A., & Şargu, A. C. (2013). Analysing the financial soundness of the commercial banks in Romania: an approach based on the camels framework. Procedia economics and finance, 6, 703-712
• Shaddady, A., & Moore, T. (2019). Investigation of the effects of financial regulation and supervision on bank stability: The application of CAMELS-DEA to quantile regressions. Journal of International Financial Markets, Institutions and Money, 58, 96-116.
• Sundararajan, V., Enoch, C., San Jose, A., Hilbers, P., Krueger, R., Moretti, M., & Slack, G. (2002). Financial soundness indicators: analytical aspects and country practices (Vol. 212). Washington, DC: International Monetary Fund.
• Van-Thep, N., & Day-Yang, L. (2019). Determinants of financial soundness of commercial banks: Evidence from Vietnam. Journal of Applied Finance & Banking, 9(3), 35-63.
• Yameen, I. Y., & Ali, M. S. (2016). Evaluating the financial soundness of the Jordanian commercial banks by applying bankometer’s model. Research Journal of Finance and Accounting, 7(2), 124-130.