Conference paper
Loan loss provisions and lending behaviour of banks: Asian evidence during 1992-2009
Accounting and Finance Association of Australia and New Zealand (AFAANZ) (Perth, Western Australia, 07/07/2013–09/07/2013)
2013
Abstract
Effects of loan loss provisioning on lending behaviour of banks remain a major concern in policy circles in order to strengthen both bank stability and financial intermediation. A sample of 686 commercial banks in Asian countries over the 1992 - 2009 period is used to identify factors contributing to the occurrence of a procyclical effect of loan loss provisions on loan growth. Our empirical results highlight that non-discretionary provisions have a procyclical effect, as higher non-discretionary provisions reduce loan growth of banks. This procyclical effect holds for large banks but not small banks. A closer investigation shows that bank market structure, economic development and institutional quality also affect the link between non-discretionary provisions and loan growth of banks. More specifically, higher bank competition, higher per capita income and higher rule of law mitigate the procyclical effect of non-discretionary provisions on loan growth regardless of whether banks are large or small. These findings have policy implications concerning the adoption of the dynamic provisioning system for Asian banks.
Details
- Title
- Loan loss provisions and lending behaviour of banks: Asian evidence during 1992-2009
- Authors/Creators
- W. Soedarmono (Author/Creator)A. Tarazi (Author/Creator)A. Agusman (Author/Creator)G.S. Monroe (Author/Creator)D. Gasbarro (Author/Creator)
- Conference
- Accounting and Finance Association of Australia and New Zealand (AFAANZ) (Perth, Western Australia, 07/07/2013–09/07/2013)
- Identifiers
- 991005543068507891
- Murdoch Affiliation
- Murdoch University
- Language
- English
- Resource Type
- Conference paper
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