Estimating The Loan Loss Provision Model As In Indicator for Efficient Risk Management In The Nigerian Banking System
Agbi, Nnenna Nkechinyere (2012) Estimating The Loan Loss Provision Model As In Indicator for Efficient Risk Management In The Nigerian Banking System. [Dissertation (University of Nottingham only)] (Unpublished)
This study investigates the risk management efficiency of banks within developing economies using Nigerian banks as a case study. To achieve this, the pro-cyclicality of the banks’ loan loss provisions and the presence of income smoothing are examined for a dataset of Nigerian banks consisting of 94 bank observations in the period 2006-2011. Estimate results show that loan loss provisioning practices within Nigerian banks have pro-cyclical inclinations. Evidence for discretionary income smoothing is found which can be associated with the practice of deliberate under provisioning for non-performing loans within Nigerian banks during the period under study. This practice is found to have been protracted by the deficient corporate governance structure that existed within the affected banks and also the inadequate levels of bank supervision during a greater part of the years in focus. Findings in this study support observed explanations for the spate of industry crises and bank failures within the Nigerian banking system and provides justifications for the on-going banking reforms by the Central Bank of Nigeria which align with the global risk management regulatory principles.
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