| Summary: | 碩士 === 國立雲林科技大學 === 財務金融系碩士班 === 100 === In recent years, governments have been promoting financial liberalization, internationalization and the business of lending banks. It makes the banks to increase the risk of the portfolio and reduce the quality of the portfolio. Although the deposit insurance can protect depositors, it also reduces the market disciplinary pressures. Therefore, the deposit insurance may increase the risk-shifting behavior by banks. We use a large sample of banks from 35 countries. The sample period of our study spans 1996-2010. In order to investigate the impacts of accounting discretion on bank risk-shifting. We estimate three distinct aspects of loan loss provisioning practices that can be construed as reflecting a forward-looking orientation. There are Smoothing, Forward-NPL and Forward-GL. Further, we empirically investigate the extent to which each aspect on bank risk-shifting behavior.
In general, our result document that discretionary provisioning in the form of earnings smoothing dampens market disciplinary and enhances the risk-shifting behavior by banks. We also document that the two of forward-looking loan loss provisioning can enhance market discipline and dampen the risk-shifting behavior by banks.
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