Loan loss provisions and macroeconomic shocks: Some empirical evidence for italian banks during the crisis

Caporale, Guglielmo Maria; Alessi, Matteo; Colli, Stefano Di; Lopez, Juan Sergio

doi:10.1016/j.frl.2017.10.031

Cited by 22 publications

(24 citation statements)

References 9 publications

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“…Kanagaretnam et al (2005) show that US banks use LLPs to signal information about banks' future prospects but the propensity to use provisions for signaling purposes is greater among smaller banks. In Italy, Caporale et al (2018) examine the determinants of loan loss provisions among 400 Italian banks during 2001 to 2015. They find that loan loss provisions in Italian banks were significantly influenced by the non-discretionary components of loan loss provisions.…”

Section: Literature Review and Hypothesis Development 21 Literature Reviewmentioning

confidence: 99%

Bank loan loss provisioning during election years: cross-country evidence

Ozili¹

2019

IJMF

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Purpose The purpose of this paper is to examine bank loan loss provisioning behavior during election years – focusing on the effect of elections on banking sector loan loss provisioning. Design/methodology/approach Regression analysis was used to analyze the behavior of bank loan loss provisioning in developed countries during election years. Findings The findings reveal that the banking sectors in developed countries have higher loan loss provisions (LLPs) in election years. Also, income smoothing is present in election years which supports the income smoothing hypothesis. Also, banking sectors with high capital levels have higher LLPs. Although, there were no significant differences in bank loan loss provisioning during election years across the four bloc, the EU banking sectors and the banking sectors of BIS member countries generally have higher LLPs while the non-EU banking sectors and the banking sectors of the G7 member countries generally have fewer LLPs. Originality/value The literature has not explored the effect of political factors such as “election-year risk” on the managers’ discretion in banks. This is the first study that explores the effect of political change on managerial discretion in banks.

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Section: Literature Review and Hypothesis Development 21 Literature Reviewmentioning

confidence: 99%

Bank loan loss provisioning during election years: cross-country evidence

Ozili¹

2019

IJMF

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“…In our baseline regressions, we exclude the lag of the LLP as a potential right-hand side variable as some previous studies in the banking sector have done (e.g., Bikker & Metzemakers, 2005). However, to analyze the determinants of loan loss provisioning in the banking sector, some other studies specify a dynamic adjustment framework model for at least two reasons: first, to capture the speed of adjustment of loan loss provisions by assuming that banks progressively adjust their level of provisions toward a target level of provisions; and second, to account for the time dependency of provisions (Bouvatier et al, 2014;Bouvatier & Lepetit, 2012;Caporale et al, 2018;Laeven & Majnoni, 2003). However, no such evidence exists in the microfinance literature.…”

Section: Dynamic Panel Estimationmentioning

confidence: 99%

“…The existing banking literature examining cyclical pattern of bank loan loss provisioning document either a countercyclical 3 provisioning behaviour (Bikker & Metzemakers, 2005;Laeven & Majnoni, 2003;Shim, 2013) or a procyclical provisioning behaviour (Caporale, Alessi, Di Colli, & Lopez, 2018;Cummings & Durrani, 2016). One assumption being that banks' borrowers are sensitive to macroeconomic conditions, and that banks' failures and economic performance are intertwined.…”

Section: Introductionmentioning

confidence: 99%

Provisioning over the business cycle: Some insights from the microfinance industry

Hessou

Lensink

Soumaré

et al. 2021

International Review of Financial Analysis

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“…In the loan loss provisions model in equation 1, the NPL variable controls for the impact of nonperforming loans on loan loss provisions. The literature show that non-performing loan is a major nondiscretionary determinant of loan loss provisions in the banking sector (see Ozili and Outa, 2017;Caporale et al, 2018;Danisman et al, 2021). Many studies report a positive relationship between loan loss provisions and non-performing loans because banks will increase loan loss provisions when they expect high non-performing loans.…”

Section: Variable Justificationmentioning

confidence: 99%

Does financial inclusion reduce non-performing loans and loan loss provisions?

Ozili¹,

Adamu²

2021

J. corp. gov. insur. risk manag.

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We examine whether countries that have high levels of financial inclusion have fewer non-performing loans and loan loss provisions in their banking sectors. The fixed effect panel regression methodology was used to analyse the effect of financial inclusion on bank non-performing loans and loan loss provisions. Using data from 48 countries, we find that greater formal account ownership is associated with high non-performing loans. Bank loan loss provisions are fewer in countries that have high levels of financial inclusion only when financial inclusion is achieved through the combined use of formal account ownership, bank branch supply and ATM supply. Also, non-performing loans are fewer in countries that experience economic boom and high levels of financial inclusion

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Loan loss provisions and macroeconomic shocks: Some empirical evidence for italian banks during the crisis

Cited by 22 publications

References 9 publications

Bank loan loss provisioning during election years: cross-country evidence

Bank loan loss provisioning during election years: cross-country evidence

Provisioning over the business cycle: Some insights from the microfinance industry

Does financial inclusion reduce non-performing loans and loan loss provisions?

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