The pro-cyclicality of loan loss provisions: Evidence from selected east Asian countries
This study investigated the evidence of pro cyclical behaviour of loan loss provision in four East Asian countries, namely Malaysia, Thailand, Singapore, and Hong Kong for the period 1995-2009. Pro-cyclical is defined as building up more loan loss provision during the bad times and reducing them in...
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| Format: | Article |
| Language: | English |
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Universiti Utara Malaysia
2017
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| Online Access: | https://repo.uum.edu.my/id/eprint/24016/1/IJMS%2024%20%281%29%2C%2023%E2%80%9339%20%282017%29.pdf |
| _version_ | 1825805031294631936 |
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| author | Abdul Adzis, Azira |
| author_facet | Abdul Adzis, Azira |
| author_sort | Abdul Adzis, Azira |
| collection | UUM |
| description | This study investigated the evidence of pro cyclical behaviour of loan loss provision in four East Asian countries, namely Malaysia, Thailand, Singapore, and Hong Kong for the period 1995-2009. Pro-cyclical is defined as building up more loan loss provision during the bad times and reducing them in good times.This study hypothesized that pro-cyclical behaviour of loan loss provision exists in East Asian countries, since they had experienced two types of financial crises – Asian financial crisis in 1997 and global economic crisis in 2008.Utilising a sample of 47 banks, the findings demonstrated that there is evidence of a pro-cyclical pattern in the countries studied, as shown by the negative relationship between loan loss provision and GDP.This study does have a policy implication, where bank regulators should take pro-active action in addressing the issue of pro-cyclicality of loan loss provision because in bad times, increasing loan loss provision would affect the bank’s profit, weaken the bank’s capital, and in turn, diminish its lending activities to creditworthy borrowers. |
| first_indexed | 2024-07-04T06:25:16Z |
| format | Article |
| id | uum-24016 |
| institution | Universiti Utara Malaysia |
| language | English |
| last_indexed | 2024-07-04T06:25:16Z |
| publishDate | 2017 |
| publisher | Universiti Utara Malaysia |
| record_format | eprints |
| spelling | uum-240162018-04-29T01:41:21Z https://repo.uum.edu.my/id/eprint/24016/ The pro-cyclicality of loan loss provisions: Evidence from selected east Asian countries Abdul Adzis, Azira HG Finance This study investigated the evidence of pro cyclical behaviour of loan loss provision in four East Asian countries, namely Malaysia, Thailand, Singapore, and Hong Kong for the period 1995-2009. Pro-cyclical is defined as building up more loan loss provision during the bad times and reducing them in good times.This study hypothesized that pro-cyclical behaviour of loan loss provision exists in East Asian countries, since they had experienced two types of financial crises – Asian financial crisis in 1997 and global economic crisis in 2008.Utilising a sample of 47 banks, the findings demonstrated that there is evidence of a pro-cyclical pattern in the countries studied, as shown by the negative relationship between loan loss provision and GDP.This study does have a policy implication, where bank regulators should take pro-active action in addressing the issue of pro-cyclicality of loan loss provision because in bad times, increasing loan loss provision would affect the bank’s profit, weaken the bank’s capital, and in turn, diminish its lending activities to creditworthy borrowers. Universiti Utara Malaysia 2017 Article PeerReviewed application/pdf en https://repo.uum.edu.my/id/eprint/24016/1/IJMS%2024%20%281%29%2C%2023%E2%80%9339%20%282017%29.pdf Abdul Adzis, Azira (2017) The pro-cyclicality of loan loss provisions: Evidence from selected east Asian countries. International Journal of Management Studies (IJMS), 24 (1). pp. 23-39. ISSN 0127-8983 http://ijms.uum.edu.my/index.php/previous-issues/169-international-journal-of-management-studies-ijms-vol-24-no-1-june |
| spellingShingle | HG Finance Abdul Adzis, Azira The pro-cyclicality of loan loss provisions: Evidence from selected east Asian countries |
| title | The pro-cyclicality of loan loss provisions: Evidence from selected east Asian countries |
| title_full | The pro-cyclicality of loan loss provisions: Evidence from selected east Asian countries |
| title_fullStr | The pro-cyclicality of loan loss provisions: Evidence from selected east Asian countries |
| title_full_unstemmed | The pro-cyclicality of loan loss provisions: Evidence from selected east Asian countries |
| title_short | The pro-cyclicality of loan loss provisions: Evidence from selected east Asian countries |
| title_sort | pro cyclicality of loan loss provisions evidence from selected east asian countries |
| topic | HG Finance |
| url | https://repo.uum.edu.my/id/eprint/24016/1/IJMS%2024%20%281%29%2C%2023%E2%80%9339%20%282017%29.pdf |
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