Factors Affecting Bank Risks in Vietnam

The research identifies the determinants of credit risk and insolvency risk in the Vietnamese banking sector. Using the data sample of 25 commercial banks over ten years (2008-2017), we examine the relationship between internal variables, external variables, and bank risks. In this study, the independent variables are bank size, bank capitalization, return on asset, return on equity, loan loss provision, capital adequacy ratio, inflation rate, and GDP growth rate. In contrast, non-performing loans and Z-score are the dependent variables. The empirical results show that all factors have an effect on bank risks except liquidity ratio.

Non-Performing Loan Determinants and Impact of COVID-19: Case of Bosnia and Herzegovina

The aim of this paper is to investigate the determinants of the movement of non-performing loans in the banking sector of Bosnia and Herzegovina, as well as the impact of the COVID-19 pandemic on them. For this purpose, secondary data from the banking sector of BiH were used, over which a multi-regression analysis was performed. The variables non-performing loans, GDP, loan loss provision, and dummy variable COVID-19 were used in the analysis. The results of the analysis showed a significant influence of all three mentioned variables. The existence of a significant positive link between non-performing loans and the state of the country's economy has been proven. In addition to the above, it has been proven that the variable COVID-19 has a delayed effect on NPLs, due to the current application of the moratorium on loans.

The Effect of Earnings Management and Signaling on Loss Loan Provision: The Role of Bank Capitalization

Objective - Loan loss provision is an accrual for the banking industry, and therefore has a significant effect on bank accounting earnings and capital requirements. Previous studies showed inconsistent results for the relationship between earnings management, signaling, and loan loss provision. The difference in the results is thought to be caused by bank capitalization. Therefore, this study aims to investigate the role of bank capitalization on the effect of earnings management and signaling on loan loss provision. Methodology – The sample consists of 86 conventional banks in Indonesia for the period of 2015-2019. Furthermore, this study used panel data analysis of multiple regression. Findings – The results showed earnings management has no effect on loan loss provision. In contrast, signaling has a positive and significant effect. Although bank capitalization is not proven to weaken the effect of earnings management on loan loss provision, it strengthens the positive effect of signaling on loan loss provision. Novelty – This study proves that bank capitalization has an important role in moderating signaling impact on loan loss provision but not for the effect of earnings management. This is due to the potential for earnings management in banks is relatively low because banks are highly regulated entities and with regulated governance mechanisms limit the managers' discretionary accounting decisions. Type of Paper - Empirical Keywords: Bank Capitalization, Earnings Management, Signaling JEL Classification: G23, G32. URI: http://gatrenterprise.com/GATRJournals/JFBR/vol6.1_1.html DOI: https://doi.org/10.35609/jfbr.2021.6.1(1) Pages 43 – 50

Bank earnings management using loan loss provisions: comparing the UK, France, South Africa and Egypt

PurposeThis paper aims to investigate bank earnings management using loan loss provision. The paper examines income smoothing, which is a type of earnings management. It compares the income smoothing behaviour of banks in the UK, France, South Africa and Egypt.Design/methodology/approachThe study uses the panel fixed effect regression methodology to analyse bank income smoothing.FindingsThe findings show that bank income smoothing is present in the UK and Egypt and absent in France and South Africa. Banks in Egypt used LLPs to smooth income before the global financial crisis. Meanwhile, bank income smoothing is pronounced in France during and after the financial crisis but was absent in the pre-crisis period. Also, bank income smoothing is reduced in countries that (1) have strict banking supervision, (2) adopt common law particularly the United Kingdom, and by countries that adopt civil law, particularly France and Egypt. Bank earnings management is greater in countries that (3) adopt a mixed legal system, particularly South Africa, and in countries that adopt International Financial Reporting Standards accounting standards.Research limitations/implicationsThe implication of the findings is that country differences may affect banks' incentive to smooth income using loan loss provision.Originality/valueThe novelty of this paper is that it explicitly analyses specific countries that have different supervisory regimes, different structure and accounting rules.

EARNINGS MANAGEMENT FOR BONUS COMPENSATION

The objectives of this quantitative study are to investigate the practice of earnings management which is proxied by Loan Loss Provision and Loan Loss Allowance and to assess the effect of bonuses on earnings management practices. Using purposive sampling, 102 banks were selected as the sample. The assessment includes one-sample t test and linear regression test. This study finds that banks commit earnings management practices by reducing LLA values and that bonuses negatively influence the practice of earnings management as proxied by LLP.

The Impact of Bank Specific and Macro-Economic Factors on Non-Performing Loans in the Banking Sector: Evidence from an Emerging Economy

The current study examines macro-economic and bank specific determinants of non-performing loans (NPLs) for commercial banks from 2008–2018. The Pakistani banking sector has observed a significant increase in NPLs. In addition, the current study is undertaken to fill this gap in the literature as most of the prior studies focus on the developed markets. In the current study, we prefer the system GMM estimator. Its reliability depends on the validity of the instruments. To testing the second-order serial correlation, we apply the J test for testing the validity of the instruments and the Arellano–Bond AR (2) test. Using dynamic-GMM estimations, we find that credit growth, net interest margin, loan loss provision, and bank diversification significantly increase NPLs, while operating efficiency, bank size, and ROA lower NPLs. In addition, higher interest rates, exchange rates, and political risk significantly increase NPLs, while GDP growth decreases NPLs. This paper provides a timely insight to management and policy makers about the determinants of NPLs. The findings help management to take corrective actions and policy makers may take into consideration the significance of macro-economic conditions while formulating policy regarding NPLs. Likewise, the study provides insight to potential investors to consider the findings while selecting better investment opportunity. The current study is the first of its kind focusing on the link among bank specific, macroeconomic variables, and non-performing loans within the specific context of an emerging economy, Pakistan.

DETERMINAN RISIKO BANK DI INDONESIA

This study investigates the relationship between deposits growth (DG), bank capital (TIER1), credits growth (CG), loan loss provision to asset (LLPA), net interest margin (NIM), and bank risk which proxied by SDROA, SDROE, and ZSCORE. The analysis in this paper uses 11 samples of listed banks in Indonesia Stock Exchange (IDX), which are carried out at the annual level from 2006 to 2018. The results indicate that the influence of bank capital (TIER1), credits growth (CG), and loan loss provision to asset (LLPA), are always persistent and significant. According to the results of this paper, the influence of deposits growth (DG), bank capital (TIER1), and credits growth (CG), on bank risk, tends to be negative since the bank risk proxy is SDROA or SDROE, while the influence of loan loss provision to asset (LLPA) and net interest margin (NIM), on bank risk, tends to be positive since the bank risk proxy is ZSCORE. However, the result of this study also shows that bank risk proxies do react differently to the determinants of bank risk.

Quality of Reported Earnings: An Empirical Study of Indian Banking Industry

Earnings management (EM) practices by bank managers can prove to be very precarious in smooth running of the financial system of a country. The failure of financial system shocks the entire economy. The present paper aims to assess the quality of earnings in the Indian banking industry. EM is estimated by employing a bank-specific model that measures EM through loan loss provision (LLP) and realized security gains and losses (RSGL). The findings exhibit that public banks practice income increasing and private banks practice income decreasing EM, whereas, combined result reinforces the practice of income decreasing EM. The results indicate that public sector banks use both LLP and RSGL to manage earnings whereas private sector banks increasingly rely on RSGL. Further, direction of EM is gauged by classifying EM on the basis of quartiles. This study has implication for regulators, investor and depositors. Regulators should be stricter regarding policies of LLP. Apart from earnings, investor and depositors should be considered other measures of stability of banks like capital adequacy ratio because earnings may be manipulated.