Accounting Conservatism and Sustainability Reporting in Changing Times: Evidence from Turkish Banking Industry

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Kaya İ. , Akbulut D. H.

17th MODAV International Conference on Accounting , Ankara, Turkey, 22 - 23 October 2020, pp.1-23

  • Publication Type: Conference Paper / Full Text
  • Doi Number: 10.31460/mbdd.841329
  • City: Ankara
  • Country: Turkey
  • Page Numbers: pp.1-23


The study aims to examine accounting conservatism in the Turkish banking sector from two sides. These can be expressed as lending policies and sustainability reporting. We firstly investigate whether accounting conservatism improves the lending capacity of banks during crisis periods. We hypothesize that higher conditional conservatism could reduce the adverse effect of the financial crises on the banks' lending capacity. We test our predictions empirically through an unbalanced panel data of 32 Turkish deposit banks in 1999-2019. We secondly examine whether a bank’s engagement in sustainability performance and reporting reduces information asymmetry and leads to less demand for conservatism by outside stakeholders. We test whether a bank conditional conservatism changes or not after starting to report sustainability information. The results of our primary hypotheses are consistent with our predictions and complement and support existing evidence in the empirical literature. We find evidence of the positive impact of conditionally conservative accounting policies on the supply of bank loans. When we test our sustainability reporting hypotheses, incoherent with prior researches and our predictions, there is no significant relationship between sustainability reporting and the level of conservatism.