Commercial Bank Loan Loss Recoveries
We present a new approach to analyse historical recovery rates on distressed bank assets. Our approach uses banks’ reported impaired assets and the corresponding specific provisions. The dynamics and drivers of this credit loss recovery proxy are studied for a comprehensive sample of Australian banks from 1989 to 2005. We find that macroeconomic and bank-specific factors influence banks’ estimates of loan loss recoveries, consistent with banks smoothing their earnings. In contrast with findings based on prices of distressed corporate bonds, banks record lower recoveries in years of strong economic growth.
|Date of creation:||01 Nov 2009|
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Working Papers in Economics
08/10, University of Waikato, Department of Economics.
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"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
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Oxford University Press, vol. 58(2), pages 277-297.
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