TY - JOUR

T1 - Loan Loss Provision Practices during Economic Crises: Evidence from Banks Listed on the Damascus Securities Exchange

AU - Ashoor, Layla

AU - Linda Ismaiel

AU - Al-Ahmad, Zeina

PY - 2023/7/13

Y1 - 2023/7/13

N2 - This study aims to examine loan loss provision (LLP) practicesexercised by banks listed on the Damascus Securities Exchange during theSyrian crisis, the incentives behind such practices, and whether those practicesdiffer between Islamic and conventional banks. A sample of elevenconventional and three Islamic banks was used during the period 2011-2018.Applying a random effect panel data model revealed that banks engaged inincome smoothing activities to decrease their income when their earnings werehigh but not to increase their income when their earnings were low. In addition,banks that reported losses in the previous year engaged in fewer incomedecreasing activities than banks that reported a profit; however, no evidencewas detected of their engagement in income increasing activities. As per theuse of LLP to manage regulatory capital or to signal future value, the findingsdid not support such practices. Moreover, Islamic banks do not appear toexercise different LLP practices or to have different incentives to manipulateLLP compared to conventional banks.

AB - This study aims to examine loan loss provision (LLP) practicesexercised by banks listed on the Damascus Securities Exchange during theSyrian crisis, the incentives behind such practices, and whether those practicesdiffer between Islamic and conventional banks. A sample of elevenconventional and three Islamic banks was used during the period 2011-2018.Applying a random effect panel data model revealed that banks engaged inincome smoothing activities to decrease their income when their earnings werehigh but not to increase their income when their earnings were low. In addition,banks that reported losses in the previous year engaged in fewer incomedecreasing activities than banks that reported a profit; however, no evidencewas detected of their engagement in income increasing activities. As per theuse of LLP to manage regulatory capital or to signal future value, the findingsdid not support such practices. Moreover, Islamic banks do not appear toexercise different LLP practices or to have different incentives to manipulateLLP compared to conventional banks.

U2 - http://dx.doi.org/10.1504/AAJFA.2023.132207

DO - http://dx.doi.org/10.1504/AAJFA.2023.132207

M3 - Article

VL - 13

SP - 277

EP - 304

JO - Afro-Asian Journal of Finance and Accounting

JF - Afro-Asian Journal of Finance and Accounting

SN - 1751-6455

IS - 3

ER -