Deregulation of banks in America has fueled corporate deception

The cancellation of the banking market organization has an unintended result, as companies are increasingly resorting to financial practices, according to a new study from Sari University.

The paper, Published in International Review of Financial AnalysisHe explains that since 1994, the reduction of banking regulations has changed the scene of corporate profits management, which led to a great comparison between two types of banking methods: the profit -based profit management (AEM) and real profit management (REM).

The profit management is based on entitlement to address financial data through accounting options and estimates, which affects the profits reported without the effect of cash flow.

While AEM includes modifying the financial statements to provide a more suitable image of financial health for the company, REM requires changing actual commercial processes, such as reducing research and development costs to amplify profits. Such practices may provide immediate financial relief, but they are long -term risks to sustainability and innovation.

“While banks are better equipped to monitor financial practices, the reality is that companies are now more inclined to engage in risky behavior that can have harmful effects on their long -term performance,” said Professor Liang Han, the head of the study at the University of Syria.

The researchers reviewed 63,846 financial statements from all over the United States who analyzed how companies changed in response to the edited banking environments, with a focus on the relationship between the capabilities of improved banks and corporate profits management strategies.

The researchers found that with banks gaining more strength in the market and improving their ability to monitor the performance of the borrower, companies turned from AEM to REM, which made more serious decisions that could endanger their future.

Professor Liang Han continued, “With banks gaining more market power and enhancing their monitoring capabilities, we have noticed a disturbing direction: companies began to shift from profit -based profit management (AEM) to realistic profit management (ReM). Douration.

“With the continued development of the corporate financing scene, it is necessary for stakeholders to remain vigilant over the potential pitfalls of the imbalance and the necessity of responsible financial practices in protecting the economy.”