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Discretionary Provisioning Practices among Western European Banks

Ozili, Peterson (2017) 'Discretionary Provisioning Practices among Western European Banks.' Journal of Financial Economic Policy, 9 (1). ISSN 1757-6385

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Abstract

The purpose of this study is to investigate whether discretionary provisioning by Western European banks is driven by income smoothing or credit risk considerations. We find evidence that discretionary provisioning by Western European banks is driven by income smoothing incentives in the post-financial crisis period, particularly, among listed banks. Also, we observe that discretionary provisioning is significantly influenced by credit risk factors, mainly, non-performing loans and loan growth. Also, we find that discretionary provisioning by Western European banks is procyclical with fluctuations in the economic cycle. Overall, the implication of the findings is that discretionary provisioning among Western European banks is driven by both income smoothing and credit risk considerations.

Item Type: Article
Uncontrolled Keywords: Managerial Discretion, Bank regulation, Loan loss provisions, Western Europe, Europe, Income Smoothing, Non-performing loans,Procyclicality. Lending, Regulation, Supervision.
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
Divisions: Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
Depositing User: Kitakogelu Ozili
Date Deposited: 09 Mar 2017 16:57
Last Modified: 01 Mar 2019 02:00
URI: http://repository.essex.ac.uk/id/eprint/19299

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