Study On The Effects Of Provision Coverage Ratio On Listed Banks' Excess Returns

With the rapid development of China's commodity economy and the continuous opening of the financial system,finance plays an increasingly important core role in China's entire economic and social system Commercial banks play an important role as a pillar in China's economic development and occupy an absolutely dominant position in China's economic and financial activities.Provision coverage ratio is defined as the ratio of bank loan loss reserves divided by non-performing loans,which is disclosed quarterly by listed companies in the banking industry.It is often used to measure the ability of commercial banks in risk prevention and control.The stock market is a very important part of China's multi-level capital market,which drives the reform of China's capital market and financial system.The number of listed companies in the banking industry is also increasing,and now it has reached 36.Changes in the banking sector have an important impact on the entire stock market.Based on the motive for profit smoothing,capital management and signal transmission of bank loan provisions,this paper makes an empirical analysis of the impacts of the provision coverage ratio on listed banks' excess returns Based on modern asset pricing theory and signal transmission theory,this article conducted a Fama-MacBeth regression analysis on the panel data from January 2009 to January 2019 of 28 listed banks that have been listed on the A-share market for more than 1 year.For banks listed after January 2009,their data from the time of listing to January 2019 are used.The results show that,without control variables,the coefficient of the provision coverage ratio is positive at a significance level of 10%;after adding the control variables,the coefficient of the provision coverage ratio is positive at a significance level of 5%,indicating that the provision coverage ratio has a positive effect on the excess returns of listed banks at the 5%significance level.According to different types of banks,28 listed companies in the banking industry are grouped into 3 categories.The empirical results show that,the provision coverage ratio has different effects on the excess returns of different types of listed banks:for the group of national joint-stock commercial banks,the coefficient of the provision coverage ratio is positive at a significance level of 1%;for the group of urban commercial banks and rural commercial banks,the coefficient of provision coverage ratio is positive at a significance level of 5%.It can be seen that,the provision coverage ratio of these two types of commercial banks has a very significant positive impact on excess returns.Correspondingly,the provision coverage ratio of large state-owned commercial banks has no significant impact on excess returns.After changing the time span and excluding the only rural commercial bank,Jiangsu Suzhou Rural Commercial Bank,the nature of the main conclusions is essentially the same.After adding the intermediary variable,institutional investor holding ratio,the provision coverage ratio has a positive effect on the institutional investor holding ratio at a significant level of 1%,and the institutional investor holding ratio has a positive effect on listed banks' excess returns at a significance level of 1%.It can be indicated that the provision coverage ratio affects the excess returns of listed banks through institutional investor holding ratio.