Monolithic Versus Differential Impacts of Sox Regulation on the Market Valuation of Banks’ Loan Loss Provision

The study carried out an empirical investigation into the quantitative effect of credit risk on the performance of commercial banks in Nigeria over the period of 11 years (2000-2010). Five commercial banking firms were selected on a cross sectional basis for eleven years. The traditional profit theory was employed to formulate profit, measured by Return on Asset (ROA), as a function of the ratio of Non-performing loan to loan & Advances (NPL/LA), ratio of Total loan & Advances to Total deposit (LA/TD) and the ratio of loan loss provision to classified loans (LLP/CL) as measures of credit risk. Panel model analysis was used to estimate the determinants of the profit function. The results showed that the effect of credit risk on bank performance measured by the Return on Assets of banks is cross-sectional invariant. That is the effect is similar across banks in Nigeria, though the degree to which individual banks are affected is not captured by the method of analysis employed in the study. A 100 percent increase in non-performing loan reduces profitability (ROA) by about 6.2 percent, a 100 percent increase in loan loss provision also reduces profitability by about 0.65percent while a 100 percent increase in total loan and advances increase profitability by about 9.6 percent. Based on our findings, it is recommended that banks in Nigeria should enhance their capacity in credit analysis and loan administration while the regulatory authority should pay more attention to banks’ compliance to relevant provisions of the Bank and other Financial Institutions Act (1999) and prudential guidelines.

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The Effects of Credit Competition on Banks’ Loan Loss Provision Timeliness: A Natural Experiment Across Contiguous State Borders

SSRN Electronic Journal ◽

10.2139/ssrn.2192586 ◽

2012 ◽

Author(s):

Yiwei Dou ◽

Stephen G. Ryan ◽

Youli Zou

Keyword(s):

Natural Experiment ◽

Loan Loss ◽

Loan Loss Provision ◽

Contiguous State

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Characteristics of banks as determinants of profit management for Islamic and conventional banks in ASEAN

Accounting ◽

10.5267/j.ac.2021.2.020 ◽

2021 ◽

pp. 1179-1188 ◽

Cited By ~ 1

Author(s):

Suripto Suripto ◽

Supriyanto Supriyanto

Keyword(s):

Discriminant Analysis ◽

Earnings Management ◽

Capital Adequacy ◽

Multiple Discriminant Analysis ◽

Loan Loss ◽

Loan Loss Provision ◽

Brunei Darussalam ◽

Capital Adequacy Ratio ◽

Asean Countries ◽

Conventional Banks

This study aims to analyze company characteristics as a determinant of conventional and Islamic bank earnings management in several ASEAN countries (Association of South East Asian Nations). The Multiple Discriminant Analysis was applied to determine the differences between Islamic and Conventional Banks. This test was conducted based on Capital Adequacy Ratio, Income Before Tax and Interest, Non-Performing and Changing Loans, and Company's Size in the banks of Indonesia, Malaysia, and Brunei Darussalam from 2014 to 2018. The data obtained from 200 banking entities were analyzed discriminatively. The results showed that there were simultaneous differences between Capital Adequacy Ratio, Earnings Before Tax, Loan Loss Provision, Non-Performing and Changing Loans, and Company's Size as determinants of earnings management between Islamic and conventional banks. Also, it was found that Company's Size was the dominant variable determining the management differences. Based on Discriminant Analysis, there were significant differences in the determinants of conventional and Islamic earnings management. The Changing Loan variable showed the highest contribution in determining earnings management in Islamic banks. Overall, this study found that conventional banks dominated Islamic system in practicing earnings management.

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Business efficiency of the commercial banks in ASEAN

Investment Management and Financial Innovations ◽

10.21511/imfi.13(1).2016.06 ◽

2016 ◽

Vol 13 (1) ◽

pp. 67-76 ◽

Cited By ~ 1

Author(s):

Abdul Mongid

Keyword(s):

The Philippines ◽

Capital Adequacy ◽

Loan Loss ◽

Loan Loss Provision ◽

Business Efficiency ◽

Personnel Expenses ◽

Cost Inefficiency ◽

Asean Countries ◽

The Cost ◽

Asset Size

This study examines the determinants of cost inefficiency of banks operating in 8 member countries of the Association of Southeast Asian Nations (ASEAN): Indonesia, Malaysia, Singapore, Thailand, the Philippines, Cambodia, Brunei and Vietnam. The author defines the cost inefficiency using accounting based efficiency known as business efficiency (CIR). Second, the researcher regresses the cost inefficiency ration on a set of bank specific variables (size, equity to total asset, personnel expenses to total expenses) and economic variables (economic growth and inflation rate) using ordinary least squared (OLS) regression analysis. The dataset of 504 banks in the ASEAN countries is used for the period from 2008 to 2012. The results show that the average cost inefficiency ratio during the period is about 59%. Banks from Vietnam exhibit the lowest cost inefficiency relative to banks in the other ASEAN countries. It is found that cost inefficiency is positively determined by inflation, loan loss provision, personnel expenses, capital adequacy and negatively by asset size and liquidity position

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The Embellishment of Bottom Line through Hyperbole of Accrued Earnings: A Case of Deliberate Earnings Management of a Non-bank Financial Institution Enlisted in Dhaka Stock Exchange and Chittagong Stock Exchange

Business and Management Studies ◽

10.11114/bms.v2i4.2009 ◽

2016 ◽

Vol 2 (4) ◽

pp. 42

Author(s):

Md. Thasinul Abedin

Keyword(s):

Financial Institutions ◽

Positive Impact ◽

Financial Institution ◽

Stock Exchange ◽

Loan Loss ◽

Accounts Receivable ◽

Loan Loss Provision ◽

Loan Loss Provisions ◽

Accrued Earnings ◽

The Impact

The study has tried to find out the key parameters through which a non-bank financial institution can embellish its earnings. The study has found that loan loss provisions increases in line with the increase in loan and advances and interest suspense. Moreover, non-bank financial institutions always report other assets except accounts receivable figure which foreshadows an existence of deliberate inflation of earnings. The study has found a positive impact of total loan loss provisions and interest suspense on accrued income, a clear message that non-bank financial institutions always report more accrued earnings to safeguard their profit. Increase in accrued income in line with total loan loss provision and interest suspense is also validated by increase in accrued income with respect to other assets except accounts receivable figure even though the impact of other assets on accrued income is insignificant at 5% level, an accounting channel through which excess other assets except accounts receivable would be inflated for excess increase in accrued income. The study has deduced that other assets except accounts receivable is a reserve bank for discretionary inflation of earnings even though it is insignificant. The study has used time series monthly data of International Leasing and Financial Services Limited, a non-bank financial institution from 2009-2015 reported in the Statement of NBDC sent to Bangladesh Bank each month. Two-time series models have been used in this study. The first model has tried to find out the impact of loan and advances, interest suspense, and other assets except accounts receivable on total loan loss provision. In the first model, there is a significant impact of loan and advances, interest suspense, and other assets except accounts receivable on total loan loss provision. The second model has tried to discern the impact of total loan loss provision, interest suspense, and other assets on accrued income along with other independent variables namely-loan and advances, total fixed assets, and operating income. The study has found a significant positive impact of total loan loss provision and interest suspense on accrued income and insignificant impact of other assets except accounts receivable on accrued income. For both models, there is no long-run relationship among the variables.

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Credit Management and Issues of Bad Debts: An Empirical Study of Listed Deposit Banks in Nigeria

Asian Journal of Economics Business and Accounting ◽

10.9734/ajeba/2020/v14i330195 ◽

2020 ◽

pp. 32-49

Author(s):

Peter E. Ayunku ◽

Akwarandu Uzochukwu

Keyword(s):

Risk Management ◽

Credit Risk ◽

Commercial Banks ◽

Random Effect ◽

Credit Risk Management ◽

Loan Loss ◽

Data Set ◽

Credit Management ◽

Loan Loss Provision ◽

The Impact

This study examines the impact of credit management on firm performance amidst bad debts, among Nigerian deposit banks. Five hypotheses were formulated following the dependent variables of Return on Asset and Tobin Q. The independent variables employed for this study include: Loan Loss Provision, Loan to Deposit Ratio, Equity to Asset Ratio, and Loan Write off. This study is based on ex-post facto research design and employed a panel data set collected from fourteen (14) commercial banks over six years ranging from 2014 to 2019 financial year. We analyzed the data set using descriptive statistics, correlation and Ordinary Least Square Regression Technique. The random effect models established that non-performing loan, loan loss provision and equity to asset impact significantly on banks’ performance in both Return on Asset and Tobin-Q models. This suggests that the sampled banks need to establish efficient arrangements to deal with credit risk management. In all, credit risk management indicators considered in this research are important variables in explaining the profitability of Nigerian commercial banks. However, based on the outcome from the empirical analysis, the study carefully recommends that investors and shareholders in these banks should be aware of the possible use of provisions for losses on non-performing loans by managers for smoothening of profits. The shareholders specifically should be ready to meet optimal agency costs to reduce the manager's information asymmetry by hiring competent internal and external auditors.

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