Bank Loan Loss Provisioning During Election Years: Cross-Country Evidence

23 Pages Posted: 29 Oct 2019

See all articles by Peterson K Ozili

Peterson K Ozili

Central Bank of Nigeria; University of Essex - Essex Business School

Date Written: 2020

Abstract

I examine bank loan loss provisioning behaviour during election years - focusing on the effect of elections on banking sector loan loss provisioning. The findings reveal that the banking sectors in developed countries have higher loan loss provisions in election years. Also, income smoothing is present in election years which supports the income smoothing hypothesis. Also, banking sectors with high capital levels have higher loan loss provisions. Although there were no significant differences in bank loan loss provisioning during election years across the four bloc, the EU banking sectors and the banking sectors of BIS member-countries generally have higher loan loss provisions while the non-EU banking sectors and the banking sectors of the G7 member-countries generally have fewer loan loss provisions.

Keywords: Loan loss provisions, income smoothing; capital management; Europe; election; banks, nonperforming loans; bank profitability; credit risk; institutional factors; financial crisis;

JEL Classification: G21, G28

Suggested Citation

Ozili, Peterson K, Bank Loan Loss Provisioning During Election Years: Cross-Country Evidence (2020). Available at SSRN: https://ssrn.com/abstract=3471669

Peterson K Ozili (Contact Author)

Central Bank of Nigeria ( email )

Plot 33, Abubakar Tafawa Balewa Way
Central Business District, Cadastral Zone
Abuja
Nigeria

University of Essex - Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

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