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Positive Accounting Theory
- Publisher
- World Scientific Publishing Company
- Copyright
- Copyright ©
- ISSN
- 0219-0915
- eISSN
- 1793-6705
- DOI
- 10.1142/S0219091509001526
- Publisher site
- See Article on Publisher Site
Abstract
This paper investigates Japanese bank managers' use of the discretionary component of loan loss provisions to manage earnings during the recession of the late 1990s. Although studies of US banks document that bank managers use loan loss provisions to smooth earnings, manage regulatory capital, and signal undervaluation, factors that may affect discretionary loan loss provisions in Japanese banks have not been empirically examined. We find that discretionary loan loss provisions for our sample of Japanese banks are positively related to the demand for external financing, realized securities gains, and prior year taxes and are negatively related to capital and pre-managed earnings.
Journal
Review of Pacific Basin Financial Markets and Policies – World Scientific Publishing Company
Published: Mar 1, 2009
Keywords: Earnings management Japanese bank managers discretionary loan loss provisions