Bank provisioning practice during the pandemic: evidence from the COVID-19 outbreak

Tram-Anh Nguyen (), Phu Ha Nguyen (), Hiep Ngoc Luu (), Trang Nguyen Ha Cu () and Phuong-Anh Nguyen ()
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Tram-Anh Nguyen: Institute of Economics and Strategic Management
Phu Ha Nguyen: Vietnam National University
Hiep Ngoc Luu: Institute of Economics and Strategic Management
Trang Nguyen Ha Cu: Vietnam National University
Phuong-Anh Nguyen: Vietnam National University

International Journal of Disclosure and Governance, 2023, vol. 20, issue 3, No 3, 248-260

Abstract: Abstract We investigate whether, and to what extent, banks exploit their discretion over loan loss provisions to achieve their management purposes during the pandemic. Using a sample of US banks during the current COVID-19 outbreak, we find that banks are more eager to use discretionary loan loss provisions in response to the worsening pandemic situation. We find in particular that banks use discretionary loan loss provisions to manage regulatory capital, smooth income and signal private information to outsiders. Overall, this paper enriches the literature on bank discretionary behaviour during the difficult time, especially during the current COVID-19 pandemic, and therefore, it has important implications for banking supervisor and bank stakeholders.

Keywords: Pandemic; COVID-19; Loan loss provisions; Capital management; Income smoothing; Signalling (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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DOI: 10.1057/s41310-022-00169-x

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