An Empirical Study on the Mutual Adjustment and Factors Influencing the Recognition of Loan Loss Provisions and Securities Gains and Losses in Banking Industry

• Main Authors: CHEN,REN-YI, 陳仁義
• Other Authors: Goo, Yeong-Jia
• Format: Others
• Language: zh-TW
• Published: 2005
• Online Access: http://ndltd.ncl.edu.tw/handle/20362728395839914657

碩士 === 國立臺北大學 === 國際財務金融碩士在職專班 === 93 === In recent years, due to over competition among banks and the economic environment continuously decline, banks’ asset quality and earnings have decreased dramatically. No matter the amount or ratio of non-performing loans, they all reached all time high among recent years. The overall performance of the banking industry has major impact on economic development and social stability. The fitness of overall banking system can even be a country’s leading indicator in terms of economic development. Under government’s “258 Financial Revolution” policy, banks administrations start to aggressively charge-off bad loans and increase equity capital, in order to improve banks’ assets quality and financial structure. This study hopes to provide banks administrations some usefulness in improving overall banking industry’s shape, in order to aide investors and debtors and others who could see through to the hidden information in financial statements. This thesis also hopes to provide some thoughts and benefits to the government’s financial agency and their policy making. This thesis will divide dependent variables into two major parts, discretionary incentive variables and non-discretionary controlled variables. The discretionary variables are focusing on the incentive to banks administration. The controlled variables are focusing on the environmental factors and other non-discretionary variables’ influences. This study hypothesizes loan loss provisions (LLPs) and securities gains and losses (RSGs), the two discretionary accounting items influencing each other, not independent, thus using three stage least square (3SLS) simultaneous equation regression model to estimate them. The empirical results shown, LLPs and RSGs were used as strategic mutual adjustment tools. Depending on authority’s objective, different goal could be achieved through manipulating the two accounting items. The empirical results support banks’ goal of recognizing LLPs were to increase capital adequacy ratio, also using LLPs to engage in earnings management. The statistical evidence also showed LLPs as a signal to improvement of coming period business performance. From the exploration of controlled variables, LLPs were also influenced by the quantitative changes of previous and current period non-performing loans. Previous period non-performing loans and issuance of subordinated financial debentures were also significantly influencing LLPs. Other than the above, RSGs were also significantly impacted from management of capital adequacy ratio, but using RSGs to engage in earnings management were not quite significant. From the exploration of controlled variables, result found, position sizes of holding bills, bonds and shares had major influences on RSGs.