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In 2018, the International Financial Reporting Standard 9-Financial Instruments became mandatory, effectively changing the underlying accounting principles of financial instruments. This paper systematically reviews the academic literature on the implementation effects of IFRS 9, providing a coherent picture of the state of the empirical literature on IFRS 9.

The study thrives on a systematic review approach by analyzing existing academic studies along the following three broad categories: adoption and implementation, impact on financial reporting, and risk management and provisioning. The study concludes by providing research prospects to fill the identified gaps.

We document data-related issues, forecasting uncertainties and the interaction of IFRS 9 with other regulatory standards as implementation challenges encountered. Also, we observe cross-country heterogeneity in reporting quality. Furthermore, contrary to pre-implementation expectations, we find improvement in risk management. This suggests that despite the complexities of the new regulatory standard on financial instruments, it appears to be more successful in achieving the intended objective of enhancing better market discipline and transparency rather than being a regulatory overreach.

As the literature on IFRS 9 is burgeoning, we provide state-of-the-art guidance and direction for researchers with a keen interest in the economic significance and implications of IFRS 9 adoption. The study identifies gaps in the literature that require further research, specifically, IFRS 9 adoption and firm’s hedging activities, IFRS 9 implications on non-financial firms. Lastly, existing studies are mostly focused on Europe and underscore the need for more research in under-researched jurisdictions, particularly in Asia and Africa. Also, to standard setters, policymakers and practitioners, we provide some insight to aid the formulation and application of standards.

The increased capital requirements and the implementation of new liquidity standards under Basel III sparked various concerns among researchers, academics and other stakeholders. The question is whether Basel III regulation is ideal, that is, adequate to deal with a crisis, such as the 2007–2009 global financial crisis? The purpose of this paper is threefold: First, perform a stress testing exercise on the US banking sector, while examining liquidity and solvency risk indicators jointly under the Basel III regulatory framework. Second, allow the study to cover the post-crisis period, while referring to key Basel III regulatory requirements. And third, focus on the resilience of domestic systemically important banks (D-SIBs), which are supposed to support the US financial system in times of stress and therefore whose failure causes the entire financial system to fail.

The authors used a sample of the 24 largest US banks observed over the period Q1-2015 to Q1-2021 and a scenario-based vector autoregressive conditional forecasting approach.

The authors found that the model successfully produces accurate forecasts and simulates the responses of the solvency and liquidity indicators to different real and historical macroeconomic shocks. The authors also found that the US banking sector is resilient and can withstand both historical and hypothetical macroeconomic shocks because of its compliance with the Basel III capital and liquidity regulations, which consist of encouraging banks to hold high-quality liquid assets and stable funding resources and to strengthen their capital, which absorbs the losses incurred in a crisis.

The authors developed a framework for testing the resilience of the US banking sector under macroeconomic shocks, while examining liquidity and solvency risk indicators jointly under Basel III regulatory framework, a point not yet well studied elsewhere, and most studies on this subject are based on precrisis data. The authors also focused on the resilience of D-SIBs, whose failure causes the failure of the entire financial system, which previous studies have failed to examine.

This paper aims to examine the impact of the mandatory adoption of (International Financial Reporting Standards [IFRS] 9) on loan provisions, nonperforming loans (NPL) and impairment loan loss in Gulf banks. This study also investigates potential variations in outcomes compared to prior models and explores the use of the Callaway and Sant’Anna (2021) estimator for difference-in-differences (DiD) with multiple time periods.

The research is based on a sample of 53 Gulf banks covering the period from 2012 to 2020. The study analyzes the changes in loan provisions, impairment loss and NPL following the implementation of IFRS 9. It uses statistical analysis and the DiD method to compare the outcomes between the experimental group (treated by IFRS 9) and the control group (not treated).

The findings reveal a statistically insignificant increase in loan provisions, impairment loss and NPL after the adoption of IFRS 9. These results align with previous studies and suggest that Gulf banks were proactive in anticipating and mitigating the impact of the new standard. The study also observes a synchronization of provisioning practices across Gulf countries and a certain level of consistency in recognizing loan losses.

The practical implications of this study suggest that Gulf banks have successfully absorbed the impact of IFRS 9 and have implemented collaborative approaches.

The study offers some new sight into IFRS9 outcomes in developing countries and opens the door for implementing a novel DiD estimation in future research studies.

This research aims to evaluate the accuracy of several Value-at-Risk (VaR) approaches for determining the Minimum Capital Requirement (MCR) for Islamic stock markets during the pandemic health crisis.

This research evaluates the performance of numerous VaR models for computing the MCR for market risk in compliance with the Basel II and Basel II.5 guidelines for ten Islamic indices. Five models were applied—namely the RiskMetrics, Generalized Autoregressive Conditional Heteroskedasticity, denoted (GARCH), fractional integrated GARCH, denoted (FIGARCH), and SPLINE-GARCH approaches—under three innovations (normal (N), Student (St) and skewed-Student (Sk-t) and the extreme value theory (EVT).

The main findings of this empirical study reveal that (1) extreme value theory performs better for most indices during the market crisis and (2) VaR models under a normal distribution provide quite poor performance than models with fat-tailed innovations in terms of risk estimation.

Since the world is now undergoing the third wave of the COVID-19 pandemic, this study will not be able to assess performance of VaR models during the fourth wave of COVID-19.

The results suggest that the Islamic Financial Services Board (IFSB) should enhance market discipline mechanisms, while central banks and national authorities should harmonize their regulatory frameworks in line with Basel/IFSB reform agenda.

Previous studies focused on evaluating market risk models using non-Islamic indexes. However, this research uses the Islamic indexes to analyze the VaR forecasting models. Besides, they tested the accuracy of VaR models based on traditional GARCH models, whereas the authors introduce the Spline GARCH developed by Engle and Rangel (2008). Finally, most studies have focus on the period of 2007–2008 financial crisis, while the authors investigate the issue of market risk quantification for several Islamic market equity during the sanitary crisis of COVID-19.

Empirical studies, to date, show that financial inclusion (FI) enhances financial stability (FS) by promoting a large deposit base, reducing information asymmetry, and strengthening market power on the one hand, and leads to financial fragility by expanding credit without proper screening, increasing operational costs, and provoking borrowers' moral hazard on the other. Thus, the most important issue is to maintain FS while extending formal financial services to the impoverished and disadvantaged segments of society. Therefore, this paper investigates the efficacy of macroprudential regulations (MPRs) to align these policy divergences.

To accomplish the objective and facilitate policy implications, the authors use aggregated and disaggregated measures of both FI and MPRs, employ advanced econometric models that minimize endogeneity and ensure robustness, and investigate their joint effectiveness in upholding FS using data of 138 countries spanning the 2004–2017 years.

The findings indicate that the effectiveness of MPRs is instrument specific. Some MPRs that obstruct access to formal financial services, in particular, moderate the advantage of FI in achieving FS, while others boost the effect of inclusion in attaining financial sector stability. Therefore, prudence should be emphasized while designing MPRs as a tool for aligning the policy trade-off between FI and FS.

To the best of the authors knowledge, this paper extends previous empirical research by investigating the conditioning impact of MPRs in the FI-FS nexus.

This study aims to examine the triple relationship between capital regulation, banking lending and economic growth in a dual markets. Specifically, the author seeks to explore how changes in capital regulation can impact banking lending practices and subsequently influence economic growth, while also investigating the reciprocal effects of banking lending on economic growth.

The author follows several previous studies such as Shrieves and Dahl (1992), Beck and Levine (2002), Altunbas et al. (2007), Saeed et al. (2020) and Stewart et al. (2021) to identify a system of three equations, regarding economic growth, capital and banking financing growth, respectively. The author estimates the parameters of all equations simultaneously using the seemingly unrelated regression method (Zellner, 1962) for a sample of 46 Islamic banks and 113 conventional banks during 2002–2022. These banks operate in 13 Muslim countries from Middle East and North Africa and Southeast Asia.

The author’s findings demonstrate that in the case of Islamic banking, an increase in loan growth stimulates economic growth, while an increasing capital ratio positively influences economic growth but is accompanied by a reduction in loan growth. This result corroborates the findings of Stewart et al. (2021), which indicate that regulatory capital reduces unstable credit while improving gross domestic product growth. However, in the case of conventional banks, the response to an increase in loan growth on Gross Domestic Product Per Capita Growth (GDPCG) is ambiguous, while the capital ratio improves GDPCG and promotes LOANG, which, in turn, increases risk.

The Islamic banks can continue to significantly contribute to economic growth by effectively directing their available capital toward viable investment opportunities and supporting sustainable financial practices, even in the presence of potential constraints on loan growth. As for conventional banks, they are invited to increase their capital levels to ensure a strong and resilient financial system that can support lending and facilitate economic growth.

To the best of the author’s knowledge, this paper is the first to explore the triple relationship between capital requirements, Islamic bank lending and economic growth.

The aim of this study is to conduct a comparative analysis between Islamic and conventional banks in terms of whether Islamic banks was more or less resilient/risky than conventional counterparts to the pandemic shock. It also examines the role of capital in improving the performance and stability within the two banking systems.

This study uses 82 banks from MENA (Middle East and North Africa) region for periods across 2011–2020, and employs a dynamic panel data approach to examine the resilience within both banking systems during the Covid-19 pandemic.

The results show that the Covid-19 pandemic has a negative impact on conventional banks' stability. However, Islamic banks performed better and were less risky than conventional ones. Banks with high-quality capital are more effective at controlling their risks and improving their performance during the pandemic.

The results offer important financial observations and policy implications to many stakeholders engaging with banks. Actually, the findings of this study facilitate to the stakeholders and bankers to have an alluded picture about determinants of risk and performance. The results can be used by bankers’ policy decision-makers to improve and enhance their consideration for risk management, taking into consideration the type of banking systems.

Compared to the various studies on the stability of Islamic and conventional banks, researchers have not sufficiently addressed the effect of the Covid-19 pandemic on risk and performance. Moreover, none of these studies has examined if Islamic banks was more or less resilient/risky than conventional counterparts to the pandemic shock. This leads the authors to identify the similarities and differences between two types of banks in the MENA region in a pandemic shock context.

The purpose of this paper is to compare earnings management (EM) and capital management (CM) by European banks before and after the adoption of IFRS 9. After IFRS 9, banks have more discretion in recognizing loan-loss provisions than before IFRS 9. Hence, after IFRS 9, banks could use EM and CM to a greater extent.

This paper analyzes a sample of European banks and uses regression analysis. First, this paper examines whether EM and CM changed after IFRS 9 was adopted. Next, this study examines whether any changes in EM and CM under IFRS 9 depend on regulatory quality (RQ) in the country where banks are located.

This paper has three results. First, after IFRS 9, EM increased relative to before IFRS 9. Second, after IFRS 9, CM increased relative to before IFRS 9. Third, this increase in EM was only for banks in countries with low RQ – in countries with high RQ, this study finds no change in EM after IFRS 9. Altogether, these results suggest that, first, EM and CM increased after IFRS 9 and, second, this increase in EM depended on the RQ of a bank’s country.

This paper identifies how the adoption of IFRS 9 affected EM and CM by European banks. The main contribution of this paper is that it examines the impact of the adoption of IFRS 9 on EM and CM by European banks using data from banks’ actual financial statements.

The authors estimate the determinants of the value of purchases of semi-durable goods using permanent and transitory income, and the demographic characteristics of customers. The purpose is to identify whether individuals face remaining liquidity constraints, and how this friction affects their purchases.

This study uses anonymized data of 516,525 credit card holders, with more than 7,501,065 records of purchases between 2010 and 2015. The authors decompose the income of individuals into permanent and transitory components to test the prevalence of the life cycle–permanent income hypothesis (LC–PIH). Determinants of the value of purchases for constrained and unconstrained consumers are estimated, considering the period in which individual characteristics are valid, the decisions not to make purchases in some months, and the potential endogeneity of the interest rate and the transitory component of income.

The authors present evidence of liquidity constraints for individuals who have used a high percentage of the credit limit on their cards. For these restricted customers, the value of purchases is inelastic to the interest rate, whereas the response is sizable for customers who are less restricted. The restricted customers increase the value of purchases when faced with increases in their credit limit. The elasticity of the value of purchases of semi-durable goods to permanent income is less than that for transitory income; regardless of the constraints, this still supports the LC–PIH.

This credit card is targeted at low- and middle-income individuals in Bogotá. Although the results might be considered as indicative of the behavior of those with similar characteristics in Colombia, the authors regard this work as the study of a particular case. A limitation of this work is that the authors do not have alternative sources of credit at an individual level.

The broad credit channel of monetary policy does not apply to the restricted customers. This should be considered not only by the monetary authority, to understand the true extent of this policy, but also by the financial institutions that use this business model. The monetary authority should be cautious not to overreact when intervening in the money market to try to prompt an adequate consumer response.

Financial institutions have the policy of modifying the credit limits of their customers' credit cards which affects the well-being of restricted customers. Given that the card is aimed at low and middle income individuals, the credit limits of customers who use a high percentage of their credit limit might be increased.

This is the first paper to study liquidity restrictions with a retail credit card in Colombia and Latin America using information on customers' characteristics. The results are highly relevant for the implementation of monetary policy.

This paper aims to examine the impact of the auditor's characteristics on bank's earnings management (EM) through loan loss provisions (LLP) for African banks.

This study is based on 360 bank-year observations from 14 African countries for the period 2011–2016, discretionary LLP is used as proxy for EM. Panel regressions have been conducted.

The authors' findings reveal that auditor's industry specialization and tenure exert a negative and significant influence on the extent of LLP-based EM. The results also show that total fees paid to the banks' auditors are positively related to the extent of EM. In a further analysis, the authors find that industry specialist auditors are more effective in reducing the incoming-increasing. Similarly, the positive relationship previously found between EM and total fees still holds only for income-increasing. Moreover, auditor tenure negatively impacts both income-increasing and income-decreasing EM. As for auditor change, results reveal differential effect on EM.

The current research extends prior literature and provides an understanding of an important external monitoring mechanism, the external audit, within African banks. To the best of the authors' knowledge, there is a paucity of cross-country studies that has addressed the influence of auditors' attributes on banks' EM in Africa.