Signaling through Accounting Accruals vs. Financial Policy: Evidence from Bank Loan Loss Provisions and Dividend Changes

Dong-Hoon Yang ()
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Dong-Hoon Yang: College of Business Administration, Dongguk Business School, Dongguk University, 3-26 Pil-dong, Chung-gu, Seoul 100-715, South Korea

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2009, vol. 12, issue 03, 377-402

Abstract: This study examines substitution or complementarity relationships between discretionary loan loss provisions (LLP) and dividend signals. The statistical tests and results presented in this study indicate that bank managers may signal simultaneously with an accounting policy (i.e., discretionary LLP) and a financial policy (i.e., dividend change). This finding primarily points out the possibility that a bank manager with an incentive to mitigate asymmetric information can select multiple signals to maximize signaling effects. Thus, LLP signaling is a complementary (rather than a substitute) signaling device of dividend signaling.

Keywords: Loan loss provisions; multiple signaling; complementary signal; dividend signal (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (4)

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DOI: 10.1142/S0219091509001678

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