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Bank provisioning practice during the pandemic: evidence from the COVID-19 outbreak

Author

Listed:
  • Tram-Anh Nguyen

    (Institute of Economics and Strategic Management)

  • Phu Ha Nguyen

    (Vietnam National University)

  • Hiep Ngoc Luu

    (Institute of Economics and Strategic Management
    Vietnam National University)

  • Trang Nguyen Ha Cu

    (Vietnam National University)

  • Phuong-Anh Nguyen

    (Vietnam National University)

Abstract

We investigate whether, and to what extent, banks exploit their discretion over loan loss provisions to achieve their management purposes during the pandemic. Using a sample of US banks during the current COVID-19 outbreak, we find that banks are more eager to use discretionary loan loss provisions in response to the worsening pandemic situation. We find in particular that banks use discretionary loan loss provisions to manage regulatory capital, smooth income and signal private information to outsiders. Overall, this paper enriches the literature on bank discretionary behaviour during the difficult time, especially during the current COVID-19 pandemic, and therefore, it has important implications for banking supervisor and bank stakeholders.

Suggested Citation

  • Tram-Anh Nguyen & Phu Ha Nguyen & Hiep Ngoc Luu & Trang Nguyen Ha Cu & Phuong-Anh Nguyen, 2023. "Bank provisioning practice during the pandemic: evidence from the COVID-19 outbreak," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 20(3), pages 248-260, September.
    • Handle: RePEc:pal:ijodag:v:20:y:2023:i:3:d:10.1057_s41310-022-00169-x
    DOI: 10.1057/s41310-022-00169-x
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    1. Anani, Makafui & Elwasify, Eman Ibrahem, 2023. "Regulatory capital management and available-for-sale securities: Evidence from the Covid-19 pandemic," Finance Research Letters, Elsevier, vol. 58(PA).

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