Loan Loss Provisioning of Us Banks: Economic Policy Uncertainty and Discretionary Behavior

dc.contributor.author Öztürk Danışman, Gamze
dc.contributor.author Öztürk Danışman, Gamze
dc.contributor.author Demir, Ender
dc.contributor.author Ozili, Peterson K.
dc.contributor.other International Trade and Finance
dc.date.accessioned 2020-12-02T19:07:52Z
dc.date.available 2020-12-02T19:07:52Z
dc.date.issued 2021
dc.department Fakülteler, İşletme Fakültesi, Muhasebe ve Finans Yönetimi Bölümü en_US
dc.description.abstract This paper examines the effect of economic policy uncertainty (EPU) on loan loss provisions (LLP). Using a sample of 6384 US banks and yearly data from 2009 to 2019 and addressing endogeneity (GMM and IV estimations), the findings reveal that in times of higher economic policy uncertainty, banks tend to increase their loan loss provisioning. Considering the four components of EPU, the findings document that the majority of the explanatory power on loan loss provisions originates from news-based and tax expiration indices. Moreover, US banks discretionally use loan loss provisions in normal times, especially for capital management and income smoothing. In uncertain times, they use provisions for income smoothing rather than capital management and after controlling for the discretionary behavior, the positive relationship of EPU and LLPs continue to hold. Additional analysis indicates that private banks conduct more income smoothing through provisions in uncertain times as compared to listed banks. The findings of the study highlight EPU as an additional procyclical factor to influence bank provisioning behavior and offer some relevant policy implications. en_US
dc.identifier.citationcount 42
dc.identifier.doi 10.1016/j.iref.2020.10.016 en_US
dc.identifier.endpage 935 en_US
dc.identifier.issn 1059-0560 en_US
dc.identifier.issn 1059-0560
dc.identifier.scopus 2-s2.0-85095777430 en_US
dc.identifier.scopusquality Q1
dc.identifier.startpage 923 en_US
dc.identifier.uri https://hdl.handle.net/20.500.12469/3506
dc.identifier.uri https://doi.org/ 10.1016/j.iref.2020.10.016
dc.identifier.volume 71 en_US
dc.identifier.wos WOS:000596671900034 en_US
dc.identifier.wosquality Q2
dc.institutionauthor Danışman, Gamze Öztürk en_US
dc.language.iso en en_US
dc.publisher Elsevier Inc en_US
dc.relation.journal International Review of Economics and Finance en_US
dc.relation.publicationcategory Makale - Uluslararası Hakemli Dergi - Kurum Öğretim Elemanı en_US
dc.rights info:eu-repo/semantics/closedAccess en_US
dc.scopus.citedbyCount 75
dc.subject Banks en_US
dc.subject Capital management en_US
dc.subject Economic policy uncertainty en_US
dc.subject Income smoothing en_US
dc.subject Loan loss provisions en_US
dc.subject Procyclicality en_US
dc.title Loan Loss Provisioning of Us Banks: Economic Policy Uncertainty and Discretionary Behavior en_US
dc.type Article en_US
dc.wos.citedbyCount 63
dspace.entity.type Publication
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