An Analysis On Loan Loss Provisioning Behaviors In Mainland China Commercial Banks

Loan loss provision is a key component of bank risk management system and an important early-warning indicator reflecting bank credit quality.Scientific use of loan loss reserve can reduce the impact on Banks,enhance the ability of commercial Banks to resist risks,improve the utilization rate of capital,and improve the profitability of commercial Banks.In 2018,the China banking regulatory commission issued the commercial bank loan loss preparation regulatory requirements about adjusting the notice of the background,this paper takes 2011 between 2016 and 193 commercial bank of China as samples,to explore the influence of our country commercial bank loan loss pro-vision behavior of the five factors,namely the cost efficiency,surplus smooth,pro-cyclical factors,capital management,signal transmission.Firstly,this paper uses stochastic frontier analysis(SFA)to estimate the cost efficiency of Banks,and obtains the cost efficiency score of sample Banks,and compares the cost efficiency score by year,bank equity type and geographical distribution.This paper finds that the cost efficiency of commercial Banks is increasing year by year.The cost efficiency of foreign Banks is higher than that of state-owned commercial Banks.From the perspective of regional effect,Banks in the economically developed regions such as the eastern and central regions are more efficient,while those in the western regions are less efficientThen,the obtained cost efficiency is taken as the explanatory variable to be included in the analysis of the influencing factors of the loan loss provision provision behavior,and the two-step systematic generalized moment method(SGMM)is used to analyze the dynamic panel data.This paper finds that the loan loss reserve of China’s commercial Banks is related to earnings smoothing factor and pro-cyclical factor,but has no significant relationship with capital management factor,signal transmission factor and cost efficiency factor.This paper argues that Banks have strong earnings smoothing motivation before entering the capital market,so Banks are encouraged to go public,issue bonds and introduce strategic investors to increase the supervision of Banks’accounting information,so as to standardize earnings smoothing behavior.Meanwhile,in order to improve the influence of pro-cyclical factors on the provision behavior of loan loss reserve,the dynamic loss provision system should be improved and differentiated dynamic loss provision coefficient should be set for Banks with different risk types.