Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/178667 
Year of Publication: 
2018
Series/Report no.: 
CFS Working Paper Series No. 591
Publisher: 
Goethe University Frankfurt, Center for Financial Studies (CFS), Frankfurt a. M.
Abstract: 
We investigate whether and how the shift from discretionary forward-looking provisioning to the restrictive incurred loss approach under International Financial Reporting Standards (IFRS) in the European Union (EU) affects the cross-country comparability and predictive ability of loan loss allowances. Given bank supervisors' keen interest in comparable and adequate loan loss allowances, we also examine the role of supervisors in determining financial statement effects around IFRS adoption. We find that the application of the incurred loss approach has led to more comparable loan loss allowances. However, some differences persist in countries where supervisors were reluctant to enforce the incurred loss approach. Our results also suggest that the predictive ability of loan loss allowances improved following IFRS adoption. Finally, in supplemental analyses we document that increased comparability of loan loss allowances is associated with the cross-country convergence of the risk sensitivity of bank leverage indicating an improvement in the effectiveness of market discipline in the EU.
Subjects: 
comparability
loan loss allowances
IFRS
bank accounting
supervisory intervention
JEL: 
M41
M48
G21
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.