ANALYSIS OF THE INFLUENCE OF THE INTERNAL AND EXTERNAL ECONOMIC SCENARIO IN THE PRACTICE OF INCOME SMOOTHING IN THE BRAZILIAN BANKS

Objective: To evaluate whether the internal or external economic scenario represented by the gross domestic product of Brazil and other economies, exerted some influence for the banks that make up the national financial system to practice income smoothing. Fundamentals: On smoothing Sood (2012) and Dolar (2016) have demonstrated that in recessive domestic economic scenarios, US banks tended not to practice income smoothing. Thus, the potential problem of this study is to verify if the banks that compose the Brazilian financial system practiced income smoothing between the 2011 until the second half of 2017, a period of slowdown in the Brazilian economy that culminated in an economic recession. Method: The logit regression in panel with fixed effects was adopted. The smoothing of results was measured by the Eckel index (1981) and its relation was tested statistically with the economic scenarios of Brazil and different global economies. Results: This study identified the GDPs of other economies as significant for the income smoothing practice of Brazilian banks. The results were important for the economic evolution of the US and the G7. Contributions: This study contributes to the literature by identifying which economic scenarios from other global economies may influence the practice of smoothing the outcome of banks in a local economy.