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Determinants of the loan loss allowance: some cross-country comparisons

Author

Listed:
  • Iftekhar Hasan

    (Rensselaer Polytechnic Institute & Bank of Finland)

  • Larry D. Wall

    (Federal Reserve Bank of Atlanta)

Abstract

This paper analyses the determinants of banks’ loan loss allowances for samples of US banks and three non-US samples: a group of 21 countries, Canada and Japan. The model includes fundamental (or non-discretionary) determinants of the allowance such as non-performing loans, and discretionary determinants such as income before the loan loss provision. The results suggest that the loan loss allowance is sensitive to pre-provision income in almost all samples. However, the results also suggest that some variables thought to reflect fundamental factors in US analysis, such as net chargeoffs, are not significant factors for non-US banks.

Suggested Citation

  • Iftekhar Hasan & Larry D. Wall, 2004. "Determinants of the loan loss allowance: some cross-country comparisons," Finance 0404018, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:0404018
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    References listed on IDEAS

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    More about this item

    Keywords

    loan loss allowance; accounting standards; international banking; nonperforming loan; discretionary accruals;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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