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Does IFRS 9 Increase Volatility of Loan Loss Provisions?

In: Regulation of Finance and Accounting

Author

Listed:
  • Oľga Pastiranová

    (Prague University of Economics and Business)

  • Jiří Witzany

    (Prague University of Economics and Business)

Abstract

This paper presents the main principles of the IFRS 9 accounting standard, which requires banks to estimate expected credit losses since 2018. The new standard is expected to change the flow of loan loss provisions, which are expected to be unstable, more volatile, and much more unpredictable than under the previous standard IAS 39, empirically tested on a sample of eight largest Czech banks according to their balance sheet volume. The hypothesis that the implementation of IFRS 9 causes increased volatility of loan loss provisions is confirmed in the case of five banks and within the whole sample of banks at a 5% probability level.

Suggested Citation

  • Oľga Pastiranová & Jiří Witzany, 2022. "Does IFRS 9 Increase Volatility of Loan Loss Provisions?," Springer Proceedings in Business and Economics, in: David Procházka (ed.), Regulation of Finance and Accounting, chapter 0, pages 243-249, Springer.
  • Handle: RePEc:spr:prbchp:978-3-030-99873-8_19
    DOI: 10.1007/978-3-030-99873-8_19
    as

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