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Loan Loss Provisioning and Relationship Banking in Italy: Practices and Empirical Evidence

Matteo Alessi (), Stefano Di Colli () and Juan Sergio Lopez ()
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Stefano Di Colli: Federcasse and John Cabot University
Juan Sergio Lopez: Federcasse, Rome

Journal of Entrepreneurial and Organizational Diversity, 2014, vol. 3, issue 1, 111-129

Abstract: A panel of Italian banks for the period 2006-2012 is used in this paper to examine LLP main determinants. Our analysis also focuses on the determinants of the sub-components of LLP, i.e. provisions associated to Bad Loans and Impaired Loans and Bad Loans and Impaired Loans Coverage Ratio. A specific analysis for cooperative credit banks is provided. We find that Loan Loss provisioning for Italian banks seems to be driven principally by non-discretionary behavior. Economic fluctuations, according to our results, do not play a significant role, nor do signaling and income smoothing. Provisioning strategies for cooperative credit banks also seem to be affected by collateralized loans.

Keywords: loan loss provisions; bank lending; financial system cyclicality (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2014
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