Bank Loan Loss Provisions, Investor Protection and the Macroeconomy

Peterson Ozili

MPRA Paper from University Library of Munich, Germany

Abstract: This study investigates the non-discretionary determinants of bank loan loss provisions in Africa after controlling for macroeconomic fluctuation, financial development and investor protection. We find that non-performing loans, loan-to-asset ratio and loan growth are significant non-discretionary drivers of bank provisions in the African region. We observe that bank provision is a positive function of non-performing loans up to a threshold beyond which bank provisions will no longer increase as non-performing loans increases. Also, bank loan-to-asset ratio is a significant driver of bank provisions when African banks have higher loan-to-asset ratios. Also, larger banks in financially developed African countries have fewer loan loss provisions while increase in bank lending leads to fewer bank provisions in countries with strong investor protection. Finally, higher bank lending is associated with higher bank provisions during economic boom. The findings have implications.

Keywords: Loan Loss Provisions; Africa; Income Smoothing; Procyclicality; Economic Cycle; Investor Protection; Banks; Macroeconomy; Credit Risk; Financial Development (search for similar items in EconPapers)
JEL-codes: A1 A11 C5 C58 F3 F38 M1 M21 M41 (search for similar items in EconPapers)
Date: 2018-06
New Economics Papers: this item is included in nep-ban
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/80281/1/MPRA_paper_80281.pdf original version (application/pdf)

Related works:
Journal Article: Bank loan loss provisions, investor protection and the macroeconomy (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:80281

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().