Research Discussion Papers, Bank of Finland
No 33/2003:
Determinants of the loan loss allowance: some cross-country comparisons
Iftekhar Hasan ()
and Larry D. Wall
Abstract: This paper analyses the determinants of banks’ loan loss
allowances for samples of US banks and three non-US samples: a group of 21
countries, Canada and Japan. The model includes fundamental (or
non-discretionary) determinants of the allowance such as non-performing
loans, and discretionary determinants such as income before the loan loss
provision. The results suggest that the loan loss allowance is sensitive to
pre-provision income in almost all samples. However, the results also
suggest that some variables thought to reflect fundamental factors in US
analysis, such as net chargeoffs, are not significant factors for non-US
banks.
Keywords: loan loss allowance; accounting standards; international banking; nonperforming loan; discretionary accruals; (follow links to similar papers)
JEL-Codes: E58; F23; G21; G28; G33; (follow links to similar papers)
37 pages, August 19, 2003
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