ID: 16828
Authors:
Fabiano Gabriel, Alexandre Assaf Neto, Luiz João Corrar.
Source:
RAUSP Management Journal, v. 40, n. 1, p. 44-54, January-March, 2005. 11 page(s).
Keyword:
banks , monetary restatement , profitability
Document type: Article (Portuguese)
Show Abstract
The main objective of this paper is to verify whether the distortions,
caused by inflation, led to significant differences on Return on Equity
(ROE) of banks in Brazil. Based on conceptual framework of monetary
restatement, which is no longer legally admitted since 1995 in Brazil,
and on cap limit in permanent assets required by Central Bank, the
following hypothesis was formulated: the return on equity stemming from
the so-called “legal financial statements” is significantly higher than
that adjusted by inflation effects. For the empirical research, a sample
with the 50 major banks, ranked by adjusted equity for the period
1996-2001, according to Exame magazine “Better and Bigger Companies”,
was selected. The results of statistical tests allowed us to reject the
null hypothesis between the means of legal and restated ratio, with a
level of significance of 1%, for all the years within the analyzed
period. Thus, we found that inflation effects must not be ignored, even
in a low rate environment. Finally, it was concluded that the
elimination of monetary restatement was a mistake and the least that
every user of accounting information should question refers to the
possibility of making inaccurate decisions, based on the analysis of
ratios taken from financial statements not adjusted by inflation.
