Purpose: This paper examines how the adoption of IFRS 9 – Financial Instruments and calendar provisioning intensity have shaped banks' lending behaviour, risk exposure, and interest income across European listed banks. Furthermore, the analysis investigates whether judicial efficiency, proxied by the clearance rate, moderates these relationships. Design/methodology/approach: Using a sample of 1,304 bank-years, a panel data analysis was conducted, spanning the period from 2014 to 2023. Findings: The results show that the adoption of IFRS 9 is associated with lower loan growth, reduced risk-weighted asset (RWA) intensity, and lower loan interest income. By contrast, calendar provisioning intensity does not affect loan growth, but it significantly decreases RWA intensity and loan interest income. Moreover, judicial efficiency strengthens all baseline relationships when IFRS 9 is used as the main explanatory variable. When calendar provisioning is used as the independent variable, however, its moderating effect is limited to risk exposure and interest income. Originality/value: This study provides novel insights on IFRS 9 and calendar provisioning, unveiling that the two regulatory tools operate through distinct ex ante and ex post channels to shape banks' lending behaviour, risk allocation, and income generation. Moreover, these effects are conditioned by institutional quality, captured by judicial efficiency. Practical implications: For banks, the findings underscore the relevance of aligning credit-risk strategies not only with accounting standards but also with institutional conditions, particularly in terms of risk allocation and income generation. For policymakers, the results hint that enhancing judicial efficiency can reinforce the regulatory role of accounting and prudential measures, thus strengthening their impact on banks' strategic decisions and interest income, rather than on lending volumes.
Purpose: This study investigates whether and to what extent the social disclosure tone used in sustainability reports (herein ‘social tone') is associated with enhanced corporate social performance (CSP) before and after the entry into force of the EU Non-Financial Reporting Directive 2014/95/UE (NFRD). Design/methodology/approach: Using a sample of sustainability reports available for the constituent firms of the Italian FTSE Italia All-Share, we employ a textual analysis approach (i.e., Natural Language Processing [NLP]) to quantify the use of social tone in corporate sustainability reports and assess its relationship with CSP. Findings: Encompassing 329 firm-year observations from 2012 to 2021, we find that social tone is positively associated with CSP, thus demonstrating that the sustainability reporting narrative plays a strategic role in firms' social performance. However, social tone is negatively associated with CSP in the period post-NFRD, suggesting a regulatory ceiling effect. Originality/value: This study underscores the dual importance of regulatory frameworks and narrative disclosure in shaping CSP. It offers significant implications for policymakers and firms aiming to effectively leverage corporate sustainability practices. Practical implications: These results imply that while regulatory mandates elevate baseline CSP, the distinct contribution of social tone becomes less impactful under mandatory regulatory conditions when there is a lack of specific disclosure requirements.
Academic research has played an important role in examining the Enterprise Risk Management (ERM) process and thinking about its organizational implications and value. Collectively, this literature reframes ERM as an organizational capability whose effectiveness depends on engagement from board and C-suite leadership, integration of governance activities overseeing both strategic direction and management's risk-taking, and alignment of risks with strategic incentives. The need for ERM has grown to become a defining element of modern corporate governance, reflecting organizations' need to manage increasingly complex strategic, operational, financial, and compliance risks that are increasingly present and rapidly evolving in today's global business environment. Whereas traditional risk management focuses primarily on insurable and financial risks within siloed, functional areas, ERM represents an enterprise-wide approach linking risk identification, assessment, and response to strategic objectives and performance outcomes (COSO 2017). We believe that advances in financial regulations, especially in Europe, provide an opportunity to create a forward-looking research agenda centered on better understanding the dynamics and practices of establishing an appropriate risk culture, risk appetite and risk management disclosure credibility - three mechanisms that increasingly define ERM effectiveness yet remain underexplored in accounting research.
