Cross country linkages as determinants of procyclicality of loan loss provisions – empirical importance of SURE specification

• Authors: Olszak Ma łgorzata , Pipień Mateusz
• Languages of publication: EN

Abstracts

EN

Procyclicality in banking may result in financial instability and therefore be destructive to economic growth. The sensitivity of different banking balance sheet and income statement variables to the business cycle is diversified and may be prone to increasing integration of financial markets. In this paper we address the problem of the influence of financial integration on the transmission of economic shocks from one country to another and consequently on the sensitivity of loan loss provisions to the business cycle. We also aim to find out whether earnings management hypotheses are supported throughout the whole business cycle. Application of the SURE approach to 13 OECD countries in 1995-2009 shows that the procyclicality of LLP is statistically significant almost in thewhole sample of countries. Independent of the econometric specification, the earnings management hypotheses are hardly supported.

Keywords

EN

loan loss provisions; procyclicality; earnings management

• Publisher: Uniwersytet Warszawski. Wydział Nauk Ekonomicznych
• Journal: Faculty of Management Working Paper Series
• Year: 2013
• Issue: WPS 2/2014
• Pages: 1-19

Dates

online

2013-08-13

Contributors

author

Olszak Ma łgorzata

• University of Warsaw, Faculty of Management Poland

author

Pipień Mateusz

• Economic Institute, National Bank of Poland, Poland

Identifiers

ISSN

2300-4371