Determinants of Portuguese bank’s provisioning policies: Discretionary behaviour of generic and specific allowances

Detalhes bibliográficos
Autor(a) principal: Pinho, Paulo Soares de
Data de Publicação: 2009
Outros Autores: Martins, Nuno Carvalho
Tipo de documento: Artigo
Idioma: eng
Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
Texto Completo: http://hdl.handle.net/10362/14948
Resumo: In this paper we test for the impact of the regulatory environment on a bank’s discretionary provisioning practices. We develop a model that structures the dynamics of the provision policy for the two classes of provisions: generic provisions and specific provisions. The model is tested using a comprehensive database of all financial institutions operating in Portugal for 1990-2000. This unique dataset comprises banks subject to the Portuguese rules as well as bank subsidiaries subject to their home-country regulation and we were able to identify distinct behaviours between them. Our results show the importance of handling he two types of provisions separately. They support the hypothesis that banks have a discretionary behaviour in setting up their provisions, and find evidence of income smoothing and capital management. We also find that the regulatory regime impacts on discretionary provisioning policies because banks when forced to increase one type of provision react by reducing the iscretionary component of the other, a finding we designated as a substitution effect.
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spelling Determinants of Portuguese bank’s provisioning policies: Discretionary behaviour of generic and specific allowancesBankingProvision policyIncome smoothingIn this paper we test for the impact of the regulatory environment on a bank’s discretionary provisioning practices. We develop a model that structures the dynamics of the provision policy for the two classes of provisions: generic provisions and specific provisions. The model is tested using a comprehensive database of all financial institutions operating in Portugal for 1990-2000. This unique dataset comprises banks subject to the Portuguese rules as well as bank subsidiaries subject to their home-country regulation and we were able to identify distinct behaviours between them. Our results show the importance of handling he two types of provisions separately. They support the hypothesis that banks have a discretionary behaviour in setting up their provisions, and find evidence of income smoothing and capital management. We also find that the regulatory regime impacts on discretionary provisioning policies because banks when forced to increase one type of provision react by reducing the iscretionary component of the other, a finding we designated as a substitution effect.EuroJournals PublishingRUNPinho, Paulo Soares deMartins, Nuno Carvalho2015-05-14T08:20:49Z20092009-01-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10362/14948engJournal of Money, Investment and Banking, V. 10, p. 43-561450-288Xinfo:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2024-03-11T03:50:25Zoai:run.unl.pt:10362/14948Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-20T03:22:12.101098Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse
dc.title.none.fl_str_mv Determinants of Portuguese bank’s provisioning policies: Discretionary behaviour of generic and specific allowances
title Determinants of Portuguese bank’s provisioning policies: Discretionary behaviour of generic and specific allowances
spellingShingle Determinants of Portuguese bank’s provisioning policies: Discretionary behaviour of generic and specific allowances
Pinho, Paulo Soares de
Banking
Provision policy
Income smoothing
title_short Determinants of Portuguese bank’s provisioning policies: Discretionary behaviour of generic and specific allowances
title_full Determinants of Portuguese bank’s provisioning policies: Discretionary behaviour of generic and specific allowances
title_fullStr Determinants of Portuguese bank’s provisioning policies: Discretionary behaviour of generic and specific allowances
title_full_unstemmed Determinants of Portuguese bank’s provisioning policies: Discretionary behaviour of generic and specific allowances
title_sort Determinants of Portuguese bank’s provisioning policies: Discretionary behaviour of generic and specific allowances
author Pinho, Paulo Soares de
author_facet Pinho, Paulo Soares de
Martins, Nuno Carvalho
author_role author
author2 Martins, Nuno Carvalho
author2_role author
dc.contributor.none.fl_str_mv RUN
dc.contributor.author.fl_str_mv Pinho, Paulo Soares de
Martins, Nuno Carvalho
dc.subject.por.fl_str_mv Banking
Provision policy
Income smoothing
topic Banking
Provision policy
Income smoothing
description In this paper we test for the impact of the regulatory environment on a bank’s discretionary provisioning practices. We develop a model that structures the dynamics of the provision policy for the two classes of provisions: generic provisions and specific provisions. The model is tested using a comprehensive database of all financial institutions operating in Portugal for 1990-2000. This unique dataset comprises banks subject to the Portuguese rules as well as bank subsidiaries subject to their home-country regulation and we were able to identify distinct behaviours between them. Our results show the importance of handling he two types of provisions separately. They support the hypothesis that banks have a discretionary behaviour in setting up their provisions, and find evidence of income smoothing and capital management. We also find that the regulatory regime impacts on discretionary provisioning policies because banks when forced to increase one type of provision react by reducing the iscretionary component of the other, a finding we designated as a substitution effect.
publishDate 2009
dc.date.none.fl_str_mv 2009
2009-01-01T00:00:00Z
2015-05-14T08:20:49Z
dc.type.status.fl_str_mv info:eu-repo/semantics/publishedVersion
dc.type.driver.fl_str_mv info:eu-repo/semantics/article
format article
status_str publishedVersion
dc.identifier.uri.fl_str_mv http://hdl.handle.net/10362/14948
url http://hdl.handle.net/10362/14948
dc.language.iso.fl_str_mv eng
language eng
dc.relation.none.fl_str_mv Journal of Money, Investment and Banking, V. 10, p. 43-56
1450-288X
dc.rights.driver.fl_str_mv info:eu-repo/semantics/openAccess
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.publisher.none.fl_str_mv EuroJournals Publishing
publisher.none.fl_str_mv EuroJournals Publishing
dc.source.none.fl_str_mv reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
instacron:RCAAP
instname_str Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
instacron_str RCAAP
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reponame_str Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
collection Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
repository.name.fl_str_mv Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
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