REGULATORY DETERMINANTS OF LOAN LOSS PROVISIONING BY DEPOSIT MONEY BANKS IN NIGERIA: AN EMPIRICAL ANALYSIS
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Abstract
This study empirically analyses the regulatory determinants of loan loss provisioning in Nigeria. The objective of the study is to investigate the relationship between nonperforming and loan loss provisions and assess whether or not bank managers lend prudently in Nigeria. We use banking and economic data for a panel of eleven banks quoted on the Nigerian Stock Exchange over the period 2002-2011. Using dynamic panel data econometric technique, we find positive relationship between nonperforming loan assets and loan loss provisions but unable to link this to prudence by Nigerian banks in their lending policy* because of inadequate disclosure oftheir total value of their non-performing loan assets and the associated credit risk. This study> therefore recommends that the bank regulators should provide greater disclosure requirements for banks to meet up with public expectations in order to facilitate effective market discipline. This is because effective market discipline depends on markets1 participants having adequate information to monitor the risk and financial conditions of banks