Value Relevance of Add-back of Loan Loss ReservesValue Relevance of Add-back of Loan Loss Reserves
- Other Titles
- Value Relevance of Add-back of Loan Loss Reserves
- Authors
- 김영준; 안혜진
- Issue Date
- 2019
- Publisher
- 서울대학교 경영연구소
- Keywords
- Add-backs; regulatory capital; loan loss reserves; value relevance
- Citation
- Seoul Journal of Business, v.25, no.2, pp.93 - 114
- Journal Title
- Seoul Journal of Business
- Volume
- 25
- Number
- 2
- Start Page
- 93
- End Page
- 114
- URI
- https://scholarworks.bwise.kr/hongik/handle/2020.sw.hongik/2179
- DOI
- 10.35152/snusjb.2019.25.2.004
- ISSN
- 1226-9816
- Abstract
- Under the current bank regulatory capital framework, loan loss reserves (LLR) are added back to regulatory capital up to a certain limit (henceforth, ‘add-backs’). This study examines how equity investors value these addbacks. Decomposing LLR into add-backs and other LLR, we find that add-backs have positive value relevance if such add-backs increase total regulatory capital and other LLR has negative value relevance. This positive value relevance of add-backs is driven by banks with low capital levels. Our finding indicates that the market perceives add-backs as capital rather than as an expense.
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Collections - College of Business Administration > Business Administration Major > 1. Journal Articles
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