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Credit unions and earnings management to mitigate political scrutiny over tax-exempt status
Journal article   Peer reviewed

Credit unions and earnings management to mitigate political scrutiny over tax-exempt status

James D. Brushwood, Curtis M. Hall and Stephen J. Lusch
Journal of accounting and public policy, v 41(4), 106907
2021
DOI: https://doi.org/10.1016/j.jaccpubpol.2021.106907

Abstract

Credit union Earnings management Loan loss provision Tax-exempt
In this paper, we examine whether credit unions manage earnings to mitigate political scrutiny. In particular, we study whether credit unions increased loan loss provisions to decrease earnings around a 2005 congressional hearing on the efficacy of credit unions’ tax-exempt status. On average, we find evidence consistent with credit unions managing earnings downward via the loan loss provision in the quarters leading up to and surrounding the congressional hearing. In addition, we find that credit unions with higher earnings before the loan loss provision engaged in more downward earnings management than credit unions with lower earnings before provision. Our findings contribute to the literature examining the use of downward earnings management to avoid political scrutiny and the banking literature. Likewise, our results inform the continued debate as to whether credit unions should be tax-exempt.

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3 citations in Web of Science
4 citations in Scopus

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Collaboration types
Domestic collaboration
Web of Science research areas
Business, Finance
Public Administration
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