An Analysis of Cost Efficiency and Loan Loss Provisioning Behaviour in Hong Kong Commercial Banks
Latheef, Fathmath Aroosha (2015) An Analysis of Cost Efficiency and Loan Loss Provisioning Behaviour in Hong Kong Commercial Banks. [Dissertation (University of Nottingham only)]
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This study examines Cost Efficiency and Loan loss provisioning in Hong Kong commercial banks between the years 2009-2014 for a sample of 23 banks. While much research explores discretionary provision determinants we argue that it is also important to access non-discretionary determinants of loan loss provisioning as well. So along with income smoothing, capital management hypothesis we further investigate cost efficiency and bank insolvency (Z-score) as possible determinants of loan loss provisions. To do so we use Cost efficiency function using SFA and a dynamic system GMM is used for Loan loss provisions model. We find that for Hong Kong commercial banks Counter-cyclical provisioning, capital management hypothesis apply and Efficiency is an important determinant of loan loss provisions in Hong Kong.
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