This paper develops a partial equilibrium model of a banking firm to analyze how provisioning rules influence loan market fluctuations. We show that a backward-looking provisioning system amplifies the pro-cyclicality of loan market fluctuations. We demonstrate that, in a forward-looking...

A panel of 186 European banks is used for the period 1992-2004 to determine if banking behaviors, induced by the capital adequacy constraint and the provisioning system, amplify credit fluctuations. We find that poorly capitalized banks are constrained to expand credit. We also find that loan...

The main objective of this paper is to empirically assess the issue of asymmetric information in banking within a framework based on the behavior of bank stock prices. Following an event-study methodology for a sample of European listed banks during the Asian and Russian crises of 1997 and 1998,...

Using a stylized real options model, we show that discretion over the timing of charging off a non-performing loan could be economically justified when collateral values are uncertain and there is a chance of loan recovery. The implied hypothesis of an quot;uncertainty dependencequot; aspect in...

The aim of this paper is to examine the impact on bank stock prices of the Asian and Russian financial crises for a sample of European banks. This issue is of importance regarding financial fragility and contagion effects within the banking industry. We develop an event study methodology based...

The aim of this paper is to examine the impact on bank stock prices of the Asian and Russian financial crises for a sample of European banks. This issue is of importance regarding financial fragility and contagion effects within the banking industry. We develop an event study methodology based...

Non-foreign direct investment capital inflows in China were particularly strong in 2003 and 2004. They have led to a rapid accumulation of international reserves and they may have provided excess liquidity to the Chinese economy. This paper investigates how the central bank of China managed the...

The literature on bank provisioning behaviour shows that changes in loan loss provisions are counter-cyclical. Based on this stylised fact, this paper develops a partial equilibrium model of a banking firm that analyzes how provisioning rules influence credit market fluctuations. The model and...

A panel of 186 European banks is used for the period 1992-2004 to determine if banking behaviors induced by the capital adequacy constraint and the provisioning system, amplify credit fluctuations. Our finding is consistent with the bank capital channel hypothesis, which means that poorly...