A study and analysis on the effect of profit management on bank efficiency

Mahnaz Zhian Nasrolahi¹

1) PhD student in accounting, Islamic Azad University, Tabriz branch,

IOI Code : XHFH-KDFBZ
Publication : The first international conference on innovation, growth and development in management, accounting and humanities(icimah.com/1st)
Abstract :
    In order to achieve continuous and stable profit, the management tries to eliminate the periodic fluctuations of profit and plan profit with a constant growth rate. This issue causes the company s future outlook to be favorable and its performance to be considered acceptable. The theory of profit quality was proposed for the first time by financial analysts and stock exchange brokers. They found that predicting future profits based on reported results as well as analyzing financial statements of companies is a difficult task due to several weaknesses in measuring accounting information. In evaluating the value of the company, financial analysts should pay attention not only to the quantity of profit, but also to its quality. The meaning of profit quality is the potential field of profit growth and the probability of realization of future profits. In other words, the value of a share depends more on our expectation of the company s future, its earning power and confidence coefficient than the company s profit per share of the current year. Financial analysts try to assess a company s earnings prospects. Profit outlook refers to the combination of favorable and unfavorable characteristics of net profit. For example, a company that has stable elements and items in its profit and loss statement has a higher profit quality than a company that does not have these items and elements. This allows analysts to predict the future profit of the company with more reliability. Reported profit is one of the important financial information that people consider when making decisions. Financial analysts generally consider reported earnings as a prominent factor in their reviews and judgments. Also, investors rely on the financial information contained in the financial statements of economic entities, especially the reported profit, for their investment decisions. They believe that a fixed dividend guarantees a higher dividend payout compared to a floating dividend. Since profit fluctuations are considered as an important measure of the company s overall risk, therefore, companies with smoother profits have less risk. Therefore, companies that have smooth profit are more liked by investors, in their opinion, they are considered a more suitable place for investment. On the other hand, managers may manipulate accounting profit to maximize profits. Their main motivation is to increase their current compensation by increasing the accounting profit. This study examines the impact of earnings management on the efficiency and productivity of Eurozone banks, while examining its evolution over time until the implementation of international financial reporting standards.

Keywords : bank efficiency and productivity profit management profit sustainability