An analysis of Cost X-efficiency and Determinants of Loan Loss Provision in China Commercial Banks
This paper uses GMM estimator to analysis the determinants of loan loss provisioning for commercial banks in China. A sample of 55 commercial banks in China are used in a dynamic panel dataset from 2010 to 2016. Although many studies estimate discretionary provision determinants, we argue that it is...
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| Format: | Dissertation (University of Nottingham only) |
| Language: | English |
| Published: |
2017
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| Online Access: | https://eprints.nottingham.ac.uk/45653/ |
| _version_ | 1848797170677841920 |
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| author | HUANG, SICHEN |
| author_facet | HUANG, SICHEN |
| author_sort | HUANG, SICHEN |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | This paper uses GMM estimator to analysis the determinants of loan loss provisioning for commercial banks in China. A sample of 55 commercial banks in China are used in a dynamic panel dataset from 2010 to 2016. Although many studies estimate discretionary provision determinants, we argue that it is also crucial to analyse non-discretionary determinants of LLPs. Therefore, apart from pro-cyclicality, income smoothing and capital management hypothesis we further investigate cost efficiency and bank insolvency (Z-score) as possible determinants of loan loss provisions. To do so we investigate cost efficiency by using Stochastic Frontier Approach, and a dynamic system GMM estimator is used for loan loss provision model. In this study, it is found that cost efficiency in loan loss provisions does exist in Chinese commercial banks; In the meantime, the LLPs are found to be pro-cyclical and the behaviour of capital management was also found. However, there is no evidence for the existence of income smoothing behaviour in Chinese banks, and the Z-score which measures insolvency risk is insignificant, thus, it cannot indicate any relationship between LLPs and insolvency risk. |
| first_indexed | 2025-11-14T19:59:37Z |
| format | Dissertation (University of Nottingham only) |
| id | nottingham-45653 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-14T19:59:37Z |
| publishDate | 2017 |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-456532018-04-17T14:37:59Z https://eprints.nottingham.ac.uk/45653/ An analysis of Cost X-efficiency and Determinants of Loan Loss Provision in China Commercial Banks HUANG, SICHEN This paper uses GMM estimator to analysis the determinants of loan loss provisioning for commercial banks in China. A sample of 55 commercial banks in China are used in a dynamic panel dataset from 2010 to 2016. Although many studies estimate discretionary provision determinants, we argue that it is also crucial to analyse non-discretionary determinants of LLPs. Therefore, apart from pro-cyclicality, income smoothing and capital management hypothesis we further investigate cost efficiency and bank insolvency (Z-score) as possible determinants of loan loss provisions. To do so we investigate cost efficiency by using Stochastic Frontier Approach, and a dynamic system GMM estimator is used for loan loss provision model. In this study, it is found that cost efficiency in loan loss provisions does exist in Chinese commercial banks; In the meantime, the LLPs are found to be pro-cyclical and the behaviour of capital management was also found. However, there is no evidence for the existence of income smoothing behaviour in Chinese banks, and the Z-score which measures insolvency risk is insignificant, thus, it cannot indicate any relationship between LLPs and insolvency risk. 2017-09-05 Dissertation (University of Nottingham only) NonPeerReviewed application/pdf en https://eprints.nottingham.ac.uk/45653/1/An%20analysis%20of%20Cost%20X-efficiency%20and%20Determinants%20of%20Loan%20Loss%20Provision%20in%20China%20Commercial%20Banks.pdf HUANG, SICHEN (2017) An analysis of Cost X-efficiency and Determinants of Loan Loss Provision in China Commercial Banks. [Dissertation (University of Nottingham only)] Loan Loss Provision; Cost Efficiency；GMM model；SFA Estimator |
| spellingShingle | Loan Loss Provision; Cost Efficiency；GMM model；SFA Estimator HUANG, SICHEN An analysis of Cost X-efficiency and Determinants of Loan Loss Provision in China Commercial Banks |
| title | An analysis of Cost X-efficiency and Determinants of Loan Loss Provision in China Commercial Banks |
| title_full | An analysis of Cost X-efficiency and Determinants of Loan Loss Provision in China Commercial Banks |
| title_fullStr | An analysis of Cost X-efficiency and Determinants of Loan Loss Provision in China Commercial Banks |
| title_full_unstemmed | An analysis of Cost X-efficiency and Determinants of Loan Loss Provision in China Commercial Banks |
| title_short | An analysis of Cost X-efficiency and Determinants of Loan Loss Provision in China Commercial Banks |
| title_sort | analysis of cost x-efficiency and determinants of loan loss provision in china commercial banks |
| topic | Loan Loss Provision; Cost Efficiency；GMM model；SFA Estimator |
| url | https://eprints.nottingham.ac.uk/45653/ |