Journal of Accounting and Economics Vol. 25 No. 1 1998
The impact of the 1989 change in bank capital standards on loan loss provisions and loan write-offs
Abstract
We investigate whether banks with low capital ratios use accounting accruals for capital ratio management. We focus on a time where we expect a change in bank managers behavior regarding certain accruals. In 1989 regulatory changes created (removed) incentives to depress loan loss provisions (write-offs) after (before) 1989. Our results show that banks with low capital ratios reduced their loan loss provisions and increased write-offs during the 1990–1992 period compared to the 1985–1988 period. Banks with high capital ratios exhibited no difference in loss provisions, but did significantly increase loan write-offs during 1990–92.
- DOI
- 10.1016/s0165-4101(98)00015-9
- Volume
- 25
- Issue
- 1
- Pages
- 69-99
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref