Re-examination of the banking
window dressing theory
New methodological approaches and
empirical evidence from the Greek case
Department of Business Administration, University of the Aegean, Chios, Greece
Purpose – The purpose of this paper is to re-examine in detail the banking window dressing (WD)
theory. Using data from the Greek banking industry during the euro period (2001-2013), the results
suggest that there are signs of upward assets and deposits WD. Moreover, it tries to explain, using
new-alternative approaches, the incentives for the WD and how the deposits WD occur.
Design/methodology/approach – To examine why bank managers upwardly WD the deposits and
which strategy increases the regular payments cost, the author uses a Granger causality procedure and
conrms the theory that the aim of increased assets report causes the deposits WD. Moreover, using a
GARCH(1,1) and a methodological approach that is usually used in calendar anomalies, but is more
exible than the one usually applied, enables us not only to conrm that there is a WD but also under
which mechanisms it occurs.
Findings – Bank managers prefer to pay increased regular payments due to the upward deposits WD
to upwardly WD the bank assets, for the following reasons: they receive compensation depending on the
assets’ volume, they gain prestige and most managers try to present increased bank assets and deposits
to include them in the “too big to fail ” (TBTF) regime. The author also nds that managers increase the
new offered bank premiums in the quarters’ end to attract more deposits, and in this way, the deposits
Research limitations/implications – The ndings of this study are limited to the Greek case, but
the methodological approach may be applied to other cases to examine the WD theory and it could
present a new-exible way for WD research.
Practical implications – Examining the institutional framework, the theoretical background and
the results, the author may suggest that reforms, at least in the way that the regular payment to the
Greek deposits insurer are paid, should be applied. In Greece, 80 per cent of the regular DIS payments
are deposited in the same nancial institution. This reduction of the ratio signicantly increase the
deposits WD cost.
Originality/value – The contribution of this paper is to re-examine the WD theory and to suggest new
and more exible methodological approaches. Moreover, this is the rst study that examines the WD for
the Greek case.
Keywords Greece, Bank opacity, Banking crisis, Window dressing
Paper type Research paper
The recent nancial crisis has revealed several pathogens of the contemporary global
economic environment. Many scholars suggest that the increased bank opacity and the
lack of trust, after the crisis started, are some of the major reasons of the nancial crisis
(Gorton, 2009;Flannery et al., 2013). However, examining the bank opacity literature, the
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Journalof Financial Regulation
Vol.23 No. 3, 2015
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