Loan Loss Provisioning Behavior, Income Smoothing and the Role of Banks' Ownership Structure

Vincent Bouvatier, Laetitia Lepetit, Frank Strobel
2012 Social Science Research Network  
We empirically examine whether the way a bank might use loan loss provisions to smooth its income, potentially in order to obscure its risk taking, is in ‡uenced by its ownership structure. Using a panel of European commercial banks, we ...nd evidence of such behavior for banks with a high level of ownership concentration. This behavior is less pronounced in countries with stronger supervisory regimes, but independent of the type of the majority shareholder. Banks with a low level of ownership
more » ... level of ownership concentration are found not to display this kind of discretionary income smoothing behavior. JEL classi...cation: G21
doi:10.2139/ssrn.2133345 fatcat:bme2ltdu2ze4hd7pu4dnxd2yza