Frequency of Interim Reporting and Impairment Losses on Financial Assets

Ferreira, Ana Clara; Morais, Ana

doi:10.15728/bbr.2023.20.2.1.en

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Article • BBR, Braz. Bus. Rev. 20 (2) • Mar-Apr 2023 • https://doi.org/10.15728/bbr.2023.20.2.1.en copy

Frequency of Interim Reporting and Impairment Losses on Financial Assets

Authorship SCIMAGO INSTITUTIONS RANKINGS

ABSTRACT

This study investigates the impact that increasing the frequency of interim reporting has on the amount of impairment losses on financial assets for a sample of listed banks. The difference-in-differences method is applied for a paired sample of 36 banks of EU-15, between 2009 and 2018. The results suggest the existence of a negative and significant association between the increase in the frequency of interim reporting and the amount of impairment losses on financial assets recognised in the profit or loss. This study is useful for regulators and supervisors, since its conclusions are relevant for the definition of the frequency of interim reporting, showing the consequences of its increase.

KEYWORDS:
Reporting; Frequency; Impairment; Financial Assets

	Number of observations
Banks listed in EU-15 countries between 2009 and 2018	1279
Invalid information regarding the frequency of the report	(286)
Entities that do not report in accordance with IFRS	(90)
No valid information on impairment losses on the financial assets	(62)
With invalid data for pairing	(107)
Entities not used in pairing	(416)
Paired final sample	318

Country	Study Group		Control Group		Final sample
Country	Obs.	Percentage	Obs.	Percentage	Obs.	Percentage
Germany	15	10,64%	10	5,65%	25	7,86%
Austria	3	2,13%	10	5,65%	13	4,09%
Denmark	6	4,26%	30	16,95%	36	11,32%
Spain	6	4,26%	17	9,60%	23	7,23%
France	0	0,00%	40	22,60%	40	12,58%
The Netherlands	6	4,26%	10	5,65%	16	5,03%
Ireland	10	7,09%	0	0,00%	10	3,14%
Italy	8	5,67%	40	22,60%	48	15,09%
Portugal	0	0,00%	10	5,65%	10	3,14%
United Kingdom	87	61,70%	0	0,00%	87	27,36%
Sweden	0	0,00%	10	5,65%	10	3,14%
Total	141	100,00%	177	100,00%	318	100,00%

Variables	Description
Ano_t	Assumes the value 1 for observations from years from 2014 onwards and 0 otherwise.
CAR_t	Capital adequacy ratio, in percentage.
Dep_t	Assumes the value 1 if the observation is from a year after the increase in IFR and 0 otherwise.
ln(TA)_t	Natural logarithm of total assets.
País_t	Assumes the value 1 if the country belongs to the Continental accounting systems and 0 otherwise.
PPI_t	Amount of impairment losses on the financial assets recognised as a loss in the period, in millions of euros.
PPI_t-1	Amount of impairment losses on the financial assets recognised as a loss in the previous period, in millions of euros.
ROA_t	Ratio between earnings before interest and taxes and average total assets.
Trat_t	Assumes the value 1 if the bank belongs to the study group and 0 otherwise.
Trat * Dep_t	Interaction between Trat_t and Dep_t
Trat * Dep * RAIP_t	Interaction between Trat_t , Dep_t and RAIP_t
ΔPIB_t	GDP growth rate per capita, at constant prices.

Variable	Obs.	Mean	Median	Standard deviation	Minimum	Maximum
PPI_t	316	1307,28	314,27	2761,55	-1352	26488
Trat_t	318	0,4434	0	0,4976	0	1
Dep_t	318	0,5660	1	0,4964	0	1
ROA_t	317	0,0113	0,0103	0,0130	-0,0442	0,0944
ΔPIB_t	318	0,0073	0,0110	0,0246	-0,0596	0,2402
PPI_t-1	305	1455,634	343,098	2988,822	-1352	26488
CAR_t	273	16,8646	16,1000	4,0639	5,5	31
ln(TA)_t	318	25,0733	25,0234	2,1453	18,5673	28,6215
País_t	318	0,6950	1	0,4611	0	1
Ano_t	318	0,5597	1	0,4972	0	1

	PPI _t	Trat _t	Dep _t	ROA _t	∆*PIB* _t	PPI _t-1	CAR _t	ln(TA)_t	País _t	Ano _t
PPI_t	1,0000
Trat_t	0,1540***	1,0000
Dep_t	-0,0999*	0,1301**	1,0000
ROA_t	-0,2042***	0,0537	0,0867	1,0000
ΔPIB_t	-0,2457***	0,1712***	0,3425***	0,0148	1,0000
PPI_t-1	0,7795***	0,2003***	-0,0366	-0,2190***	-0,0324	1,0000
CAR_t	-0,1227**	0,2686***	0,0891	0,3707***	0,1616***	-0,1073*	1,0000
ln(TA)_t	0,4996***	-0,0141	-0,0597	-0,2528***	-0,0281	0,5145***	0,0593	1,0000
País_t	-0,2853***	-0,7423***	-0,1529***	-0,0201	-0,1163**	-0,3252***	-0,2114***	-0,1226**	1,0000
Ano_t	-0,2672***	0,1157**	0,4760***	0,1115**	0,4380***	-0,2456***	0,3056***	-0,0339	-0,0097	1,0000

PPI _t	Before the increase in frequency of IFR (PPI _t =0)		After the increase in frequency of IFR (Dep _t =1)		Differences
Control group (Trat_t =0)	1016,586		848,354		-168,231	(0,75)
Study group (Trat_t =1)	2649,593		1286,095		-1363,498	(2,08)**
Differences	1633,008	(3,42)***	437,741	(1,08)	-1195,267	(1,91)*

Variable	Expected sign	Coefficient	Robust standard deviation	p-value
Constant	+/-	-1013.608	833,289	0,224
Trat_t	+/-	673,968**	335,487	0,045
Dep_t	+/-	322,104*	185,235	0,082
Trat * Dep_t	+/-	-897,926**	382,280	0,019
ROA_t	+/-	-21073,13*	11798,420	0,074
∆PIB_t	+	-16106,02*	9505,899	0,090
PPI_t-1	+	0,6396***	0,0846	0,000
CAR_t	+/-	-1,418	12,681	0,904
ln(TA)_t	+/-	69,986**	31,187	0,025
País_t	-	-328,988	195,196	0,092
Ano_t	+/-	-24,692	204,119	0,904
R²: Within=0,5008			Number of observations=263
Between=0,9468			Number of groups=36
Overall=0,7228
			Wald $χ^{2}$ (11)=364,88
Corr(v_i , X)=0 (assumed)			p-value=0,0000

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