Proceedings of 6th Annual American Business Research Conference
9 - 10 June 2014, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-52-8
Profits Persistence, Competition and Earnings Management of Banks
Mohammed Amidu* and Simon K. Harvey**
This paper applies Markov chain to analyse the extent and mobility of
profit persistence. Dynamic auto regressive model is used to assess the
speed of convergence while quantile regression technique is employed
to examine the determinants of profit persistence of 330 banks across 29
African countries. The results show that a high level of profit persistence
and relatively low speed of convergence provide no support for the
hypothesis that there is lower persistence of profits in developing
countries due to more intense competition. We also find that competition
reduces the level and the speed of profit persistence and that, earnings
management has a significant impact.
JEL classification: G21 D42 C33, N27
*Mohammed Amidu; Department of Accounting, University of Ghana Business School, P.O. Box LG 78, Legon, Accra,
Ghana. Email: amidu@ug.edu.gh. Tel: +233 302 903007
**Dr. Simon K. Harvey, Department of Finance, University of Ghana Business School, P.O. Box LG 78, Legon-Accra.
Ghana: email: sharvey@ug.edu.gh;
Mohammed Amidu would like to thank the VolkswagenStiftung Foundation and Funddacao Calouste Gulbenkian for
funding this research which is part of research project on “Knowledge for tomorrow- Cooperative Research Projects in
Sub-Saharan Africa