scholarly journals Effects of loan loss provisions on growth in bank lending : Some international comparisons

2013 ◽  
Vol n° 132 (4) ◽  
pp. 91-116
Author(s):  
Vincent Bouvatier ◽  
Lætitia Lepetit
Keyword(s):  
International Comparisons ◽  
Bank Lending ◽  
Loan Loss ◽  
Loan Loss Provisions

scholarly journals Bank loan loss provisions, investor protection and the macroeconomy

2018 ◽  
Vol 13 (1) ◽  
pp. 45-65 ◽  
Author(s):  
Peterson K. Ozili
Keyword(s):  
Investor Protection ◽  
Positive Function ◽  
Bank Lending ◽  
Bank Loan ◽  
Loan Loss ◽  
African Region ◽  
African Countries ◽  
Content Type ◽  
Loan Loss Provisions ◽  
Economic Boom

Purpose The purpose of this paper is to investigate the non-discretionary determinants of bank loan loss provisions in Africa after controlling for macroeconomic fluctuation, financial development and investor protection. Design/methodology/approach The author uses static and dynamic regression estimation to test for the determinants of bank loan loss provisions. Findings The author finds that non-performing loans (NPL), loan-to-asset ratio and loan growth are significant non-discretionary drivers of bank provisions in the African region. The author observes that bank provision is a positive function of NPL up to a threshold beyond which bank provisions will no longer increase as NPL increases. Also, bank loan-to-asset ratio is a significant driver of bank provisions when African banks have higher loan-to-asset ratios. The author finds that larger banks in financially developed African countries have fewer loan loss provisions while increase in bank lending leads to fewer bank provisions in countries with strong investor protection. Finally, higher bank lending is associated with higher bank provisions during economic boom. Originality/value This study is the first to assess the determinants of non-discretionary bank provisions in Africa as part of micro-prudential surveillance of banks in the African region.

Loan Loss Provisions and Bank Lending Behavior: Do Information Sharing and Borrowerss Legal Rights Matter?

2016 ◽  
Author(s):  
Wahyoe Soedarmono ◽  
Amine Tarazi ◽  
Agusman Agusman ◽  
Gary S. Monroe ◽  
Dominic Gasbarro
Keyword(s):  
Information Sharing ◽  
Bank Lending ◽  
Legal Rights ◽  
Loan Loss ◽  
Loan Loss Provisions ◽  
Lending Behavior

scholarly journals Loan Loss Provisions, Income Smooth, Signaling, Capital Management and Pro-Cyclicality. Empirical Evidence from Mozambique’s Commercial Banks

2017 ◽  
Vol 9 (11) ◽  
pp. 48 ◽  
Author(s):  
Tito Tomas Siueia ◽  
Wang Jianling
Keyword(s):  
Empirical Evidence ◽  
Public Debt ◽  
Commercial Banks ◽  
Debt Crisis ◽  
Bank Lending ◽  
Income Smoothing ◽  
Capital Management ◽  
Loan Loss ◽  
Management Activity ◽  
Loan Loss Provisions

The aim of this study is to provide the first empirical evidence of income smoothing, capital management, signaling, and pro-cyclical behavior through loan loss provisions (LLP) for Mozambican commercial Banks, an example of the under-developed country. A second goal is to understand the bank lending behavior during the Mozambique’s hidden public debt crisis. The sample consists of all commercial banks observed during 2010-2016. We provide strong evidence that Mozambican commercial banks are pro-cyclical through LLP and these banks engage in income smoothing activity. However, for capital management activity and signaling behavior, we provide insignificant evidence to support these hypotheses among Mozambican commercial banks via LLP. Also, the result indicates that Mozambique’s hidden public debt crisis, the commercial banks put aside more provisions.

Earnings management and equity incentives: evidence from the European banking industry

2019 ◽  
Vol 27 (2) ◽  
pp. 244-261 ◽  
Author(s):  
Mohammad Alhadab ◽  
Bassam Al-Own
Keyword(s):  
Earnings Management ◽  
Management Practices ◽  
Banking Industry ◽  
Future Research ◽  
Loan Loss ◽  
Content Type ◽  
Loan Loss Provisions ◽  
Equity Incentives ◽  
European Banking ◽  
European Banks

Purpose This study aims to examine the effect of equity incentives on earnings management that occurs via the use of loan loss provisions by using a sample of 204 bank-year observations over the period 2006-2011. Design/methodology/approach The authors use the data of 39 European banks to test the main hypothesis. Several valuation models and regressions are used to measure the main proxies for executives’ compensation and the determinant factors of loan loss provisions. Findings The empirical results reveal that earnings management that occurs via discretionary loan loss provisions is associated with equity incentives in the banking industry. In particular, European banks’ executives with high equity incentives are found to manage reported earnings upwards by reducing loan loss provisions. The results therefore show that income-increasing earnings management via discretionary loan loss provisions is widely practised by the executives of European banks and that this is partly motivated by executives’ compensation. Practical implications The findings of this paper present important implications for regulators in the European Union, who should take further steps to reform the regulatory environment to monitor and mitigate the earnings management practices that occur via the manipulation of loan loss provisions. Earnings management practices do not just negatively affect subsequent performance but are also found to lead to firms’ failure. Thus, regulators should take the necessary reforms to protect the wealth of stakeholders (investors, creditors, etc.). Originality/value This study provides the first evidence on the relationship between equity incentives and earnings management in the European banking industry. The study sheds more light on an issue of great interest to a broad audience that does not receive much attention in the prior research, thus opening new avenues for future research.

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