Microbank Regulation and Earnings Quality : A Global Survey

This study specifically addresses the call for more research on regulation and other corporate governance mechanisms of banks in emerging markets. Thus far, the scarce existing microbank research has focused on regulations and performance. Therefore, in this study, we focus on the impact of banking regulation on microfinance managers' behavior. Specifically, we investigate if the presence of banking regulations affects the earnings quality of microbanks. Our starting premise is that there is a substantial degree of managerial discretion involved in the financial reporting process and the produced earnings quality. Earnings quality metrics measure the relevance and usefulness of the financial reporting, and summarizes the degree to which such discretion is applied in a manner that is (un)favorable to an entity's external stakeholders