Finance Research Seminar – Dr Mamiza Haq
Date: Wednesday 5 February 2025 | Time: 14:00 to 15:00
Location: Frederick Douglass Centre, Room 1.17
The Finance research group welcomes Dr Mamiza Haq.
She will present her work, entitled "From Earnings Games to Systemic Gains: Rethinking Macro-Prudential Policy in Banking."
About the speaker
Dr Mamiza Haq holds Bachelor of Commerce (Banking and Finance), Master of Commerce (Finance), Master of Science (Finance), and PhD degrees. She is a Fellow of the Higher Education Academy (HEA). Dr Haq’s research interests focus on bank regulation, credit risk, capital adequacy, financial crises, and corporate finance. She has received several competitive research grants and serves as Deputy Editor for Accounting and Finance.
Research abstract
Our study examines the impact of macroprudential policy on “earnings quality” and “opportunistic earnings management” in individual banks across 68 developed and developing countries from 1996 to 2019. Our findings show that macroprudential policies, particularly, tightening (loosening) measures, negatively (positively) affect earnings quality, prompting concerns about their effectiveness in promoting long-term financial stability. Specifically, we observe asymmetric effects, with tightening policies having a greater impact on earnings quality than loosening policies. Further, we identify that different types of macroprudential policies exhibit varying effects, with demand-side policies showing longer time lags compared to supply-side measures. Regarding opportunistic earnings management, our results indicate that although tightening supply-side policies generally deter meet-or-beat behaviours, however, liquidity tightening policy may encourage such behaviours. Yet, our results suggest that banks are less likely to manage earnings to just-meet-or-beat prior year’s earnings when demand-side loosening policies are stronger. Additionally, liquidity-focused tightening macroprudential policies significantly reduce earnings management by curbing abnormal loan loss provisions (LLPs), whereas supply-side and demand-side tightening policies may inadvertently increase abnormal LLPs. The results remain robust to several alternative tests and explanations. Our evidence suggests that banks may employ macroprudential policies associated with less earnings games to mitigate agency concerns, regulatory arbitrage, information asymmetry, and to establish credible reputation.