An empirical study of income smoothing behavior on reported earnings and their market reactions

本研究考察了与盈余管理相关的三个问题及其市场反应：（1）盈余持续性及其市场反应（2）银行持有证券的证券损益（已实现和未实现）补充信息的信息有用性（3）政府对日本银行的股利支付限制导致的管理层对会计盈余的自由裁量权。这一结果与美国市场的研究结果一致，日本和美国市场的一些研究表明，SGL的补充披露在银行股票中得到了评估。然而，银行持有的证券中有相当一部分是股票，这可能意味着市场参与者能够从股票市场指数中做出合理的估计。实证结果支持这种可能性，一旦市场指数被纳入银行股票价格模型，实现SGL失去了统计意义。模型中包含的市场指数也降低了未实现SGL的重要性，特别是对于证券组合与市场组合相似的货币中心银行。关于银行经理的自由裁量权，我研究了资本管制（股息准则）下由股息支付政策驱动的盈余管理。在这一指导方针下，预计一家银行与低当前盈利将被迫增加收入的自由裁量权，以保持在一定水平的股息支付率。为了检验这一假设，我专门专注于应计项目和递延（A&D）的银行作为管理来源的自由裁量权。实证检验支持这一预测。A&D行为与收入增长动机一致。此外，这种行为显着减少后，暂停指导，这也表明存在盈余管理。

In this study, I examine three issues regarding earnings management and the market reaction to it:(1) earnings persistence and market responses to it(2) information usefulness of supplemental information of security (realized and unrealized) gains and losses (SGL) on banks' holding securities(3) management discretion on accounting earnings induced by the governmental dividend payment restriction on Japanese banksAs for (1), I found that earnings persistence captured by applying ARIMA process to reported earnings in priced; that is, higher persistence is favorably valued in the market. This result is consistent with prior research in US market.Several studies both in Japanese and US markers show that supplemental disclosure on SGL is valued in banks' equities. However considerable portion of banks' holding securities consists of equities, this may implies that market participants are able to make reasonable estimation from stock market index. Empirical results support this possibility; once market index is included in the bank stock price model, realized SGL loses its statistical significance. Inclusion of market index in the model also reduces the significance of unrealized SGL, especially for money center banks whose security portfolio is similar to the market portfolio.With regard to bank managers' discretion, I examine earnings management motivated by dividend payment policy under the capital regulation (dividend guideline). Under this guideline, a bank with low current earnings is predicted to be forced income increasing discretion to keep stay with a certain level of dividend payout ratio. To test this hypothesis, I exclusively focus accruals and deferrals (A&D) of banks as management source of discretion. Empirical tests support this prediction. The behavior of A&D is consistent with income increasing motivation. Further, that behavior significantly diminishes after the suspension of the guideline, which also suggests the existence of earnings management.