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Some Empirical Evidence of Loan Loss Provisions for Albanian Banks

Author

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  • Elona Dushku

    (PhD Candidate, Tor Vergata University, Italy)

Abstract

In this paper we used a panel of Albanian banks for the period 2004-2014 to examine the main determinants of loan loss provisions. In addition, we tested how the latest crisis has affected provisioning behaviour of the banks. We find that loan loss provisions of banks are driven by non-discretionary components and economic fluctuations. Furthermore, we find a positive and significant result between earnings before interest, taxes and provisions and loan loss provisions, thus confirming the income smoothing hypothesis. Our estimated results do not support the capital management and signalling hypotheses. We also find that the global crisis has contributed significantly to the procyclicality of loan loss provisioning in Albania and banks continued to do income smoothing during the crisis.

Suggested Citation

  • Elona Dushku, 2016. "Some Empirical Evidence of Loan Loss Provisions for Albanian Banks," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 5(2), pages 157-173.
    • Handle: RePEc:cbk:journl:v:5:y:2016:i:2:p:157-173
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    File URL: http://www.cbcg.me/repec/cbk/journl/vol5no2-8.pdf
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    Citations

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    Cited by:

    1. Amina Malik & Haroon Aziz & Buerhan Saiti & Shahab Ud Din, 2021. "The Impact of Earnings variability and Regulatory Measures on Income Smoothing: Evidence from Panel Regression," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 10(1), pages 183-201.
    2. Malik, Amina & Butt, Babar Zaheer & Din, Shahab Ud & Aziz, Haroon, 2020. "Impact of Earnings Variability and Regulatory Measures on Income Smoothening in Islamic Banks — Evidence from an Emerging Market," Public Finance Quarterly, Corvinus University of Budapest, vol. 65(3), pages 397-410.
    3. Malik, Amina & Din, Shahab Ud & Shafiq, Muhammad & Butt, Babar Zaheer & Aziz, Haroon, 2019. "Earning Management and the Likelihood of Financial Distress in Banks — Evidence from Pakistani Commercial Banks," Public Finance Quarterly, Corvinus University of Budapest, vol. 64(2), pages 208-221.

    More about this item

    Keywords

    Loan loss provisions; Procyclicality; Income Smoothing; Albanian banks; Dynamic GMM.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation

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