Bank audit practices and loan loss provisioning |
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Authors: | Drew Dahl |
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Institution: | Department of Economics and Finance, Jon M. Huntsman School of Business, Utah State University, Logan, UT 84322, United States |
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Abstract: | I empirically examine the evolution of loan loss accounting across banks that differ categorically by external auditing practice. Using a partial adjustment model, and a sample of 75,505 observations on affiliated banks, 1995–2009, I find evidence of convergence across audit categories in target ratios of provisions for loan losses to nonaccrual loans. This is consistent with a standardized method of accounting for “impaired” loans. I observe less convergence, on the other hand, in target ratios of provisions for loan losses to loans, which appears to accommodate a role for managerial discretion. |
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Keywords: | G21 G28 M41 M42 |
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