Tests on the regulatory determinants of reporting quality in European banks.

Summary The central theme of my doctoral dissertation is Regulation in multiple forms. Specifically, I focus on the parameters affected by mandatory, optional or self-developed regulation. The three chapters of the current paper use the banking industry in European Union (EU) countries as a parameter. Over the past decade, the banking industry has undergone several regulatory transformations that have affected the quantity and quality of information disclosed. In addition, the recent financial crisis had banks in the spotlight, given their central role in the market downturn.In the first chapter, "Does Basel II Affect the Market Assessment of Discretionary Loan Loss Provisions?", I examine the impact of the 2008 Basel Capital Accord implemented in the European Union. Basel II was intended to bring an increased level of transparency to the operations of banks. As a result, Basel II introduces an incentive for banks to (1) increase their forward-looking provisioning and (2) reduce their opportunistic provisioning.In our institution, Basel II introduces incentives for managers to recognize less discretionary income-growing loan loss provisions (DLLPs). The increasing income-DLLPs are important since they are recognized in the literature as mostly opportunistic. These findings are of particular importance in light of recent and upcoming regulatory developments in the banking industry. I am referring to the introduction of IFRS 9 in 2018 and Basel III in 2019. Our results highlight the need for accounting and banking regulators to coordinate their efforts with disregard to their innate way of different objectives.For my second chapter, "Has Basel II induced conservatism reduced the level of revenue management of EU banks?" Basel II reduces the discretionary power of provisions that is used in the pre-adoption period of opportunistic reporting (to recognize the increasing revenues to achieve earnings management DLLPs objectives).The third chapter, "The impact of the EU Bank 2010 Stress Test Disclosure results on banks" earnings management analyzes the impact that the disclosure of the Prospective 2010 Macroeconomic Stress Test (ST) has on the level of participating banks opportunistic reporting. Specifically, it tests whether the disclosure decreases and therefore the opacity of the bank earnings (approximated by management and regularization of the benchmark income to beat it) tested banks relative to non-banks tested.We find that banks that enter the era of reducing the level of their benchmark hits. In corroboration with previous results, we document that disclosure of ST likely reduces the results of banks' opacity and managers reduce opportunistic reporting due to increased public scrutiny. This paper is the first to analyze the impact that ST disclosure results has on the earnings level of banks' management practices and adds to the emerging ST literature.Overall, my thesis sheds light on current and relevant issues that concern one of the most scrutinized and criticized industries in the world. By analyzing the effect of different sets of regulations on financial reporting and accounting numbers, this thesis makes numerous contributions to the academic literature and sheds light on the practical effects of overlapping regulations in the EU.