Abstract
This paper investigates the determinatives of loan loss provisions by using U.S., Asian and European banks data. The purpose of this paper is to do a cross-country comparison of bank managers’ choices for capital, earnings management and signaling effects. Our results show that capital management plays an important role for loan loss provisions in these three regions. Our results also show that earnings smoothing are important determinatives for U.S. and European banks’ loan loss provisions. Additionally, we find that loan loss provisions are positively related to future earnings changes in U.S. banks which supports the hypothesis of signaling effects.
In a separate section, we examine ownership structure’s influences on banks’ choices of loan loss provisions. We find that capital and earnings management can be seen in U.S. banks with diffused or concentrated ownership. We also find that earning management play an important role for loan loss provisions in Asian banks with diffused or concentrated ownership, however, capital management is not apparent for banks with concentrated ownership. In addition, our results show that capital management plays an important role for loan loss provisions in European banks with diffused or concentrated ownership, but earnings management can not be found in banks with concentrated ownership.

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