A Review on Accounts Manipulation Via Loan Loss Provisions to Manage Regulatory Capital and Earnings Along Business Cycle

Roselee Shaharudin
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Roselee Shaharudin: Lecturer of Finance School of Management Universiti Sains Malaysia

Jurnal Ekonomi Malaysia, 2004, vol. 38, 99-123

Abstract: This article reviews past academic literatures on how loan loss provision is being used as a tool to adjust regulatory capital and earnings numbers in case of Malaysian commercial banks. The incentives on managing the accruals arise due to close monitoring by central banks, which measures commercial banks performance in term of capital adequacy and earnings volatility along the business cycle. The literatures however failed to conclude that banks unanimously managed their regulatory capital and earnings by loan loss provisions being the largest accruals in bank expense account.

Keywords: capital management hypothesis; earning management hypothesis; loan loss provision (search for similar items in EconPapers)
Date: 2004
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