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<p>We examine whether and how changes in bank accounting standards influence borrowers’ earnings management activities. Exploiting the implementation of FAS 166/167, which required banks to consolidate previously off-balance-sheet securitized assets, we find that borrowing firms increase their use of accrual-based earnings management following the reform. This effect is notably stronger among borrowers with greater financing needs and higher information opacity. Overall, our study documents a previously underexplored spillover effect of bank accounting reforms on borrowers’ accounting practices and underscores the importance of considering possible borrower-level responses when evaluating future accounting reforms in the banking sector.</p>

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Does the change in accounting requirements on banks affect borrowers’ earnings management? Evidence from FAS 166/167

  • 期刊论文

  • 发表日期：

    2026年6月18日

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  • Wei Song,
  • Tingyu Sun,
  • Qingjing Zhang,
  • Zhuang Zhang

摘要

We examine whether and how changes in bank accounting standards influence borrowers’ earnings management activities. Exploiting the implementation of FAS 166/167, which required banks to consolidate previously off-balance-sheet securitized assets, we find that borrowing firms increase their use of accrual-based earnings management following the reform. This effect is notably stronger among borrowers with greater financing needs and higher information opacity. Overall, our study documents a previously underexplored spillover effect of bank accounting reforms on borrowers’ accounting practices and underscores the importance of considering possible borrower-level responses when evaluating future accounting reforms in the banking sector.