The Influencing Factors Of The Provision For Loan Loss Of China 's Commercial Banks And The Impact Of Portfolio On Credit

This thesis studies the determinants of bank loan loss provisioning behavior and whether the current provisioning system amplify credit fluctuations of China’s commercial banks over the period of2004-2011. I distinguish between public and private banks, city banks and national banks, and exploit the impact of the New Accounting Policy on banks’ earnings management. The result shows that forward-looking provision is used by China’s banks. I find strong support for the hypothesis that loan loss provisions are used for income smoothing. Both city banks and non-listed banks have a stronger incentive to smooth their income through loan loss provisions. Meanwhile, compared with non-listed city banks with bond issues, non-listed city banks without bond issuance demonstrate more significant income-smoothing behavior. In addition, the implementation of New Accounting Policy has no significant impact on banks’ income-smoothing behavior. I do not find the evidence of capital management and signaling. As to the signal of current provisioning system, I find that non-discretionary loan loss provisions result in greater credit volatility while discretionary loan loss provisions have no significant impact on credit volatility.