Информационный эффект банковских резервов по плохим долгам
The analysis of financial reporting for banks is of great interest for risk assessment and for understanding the potential
for an increase in market value. Following the quantitative decomposition of the size of bank reserves on bad debts, the article concludes that there is the existence of a “subjective component” that acts as a qualitative signal for market investors. The paper analyses information on the significance for market investors of a number of indicators of financial reporting of 989 commercial public banks associated with credit risk. The paper focuses on the consideration of three financial statement items: non-performing loans, loan charge-offs, and loan loss provisions.
The study provides an analysis of statistical data on the Russian market and the results of the empirical research on the
global bank market with sub-samples on the developed and emerging markets, and the Eastern European and CIS banks.
The analysis scale is from 2011 to 2015, in quarterly observations. It is shown that the share of non-performing loans, loan loss provisions and loan charge-offs can be informative for market investors not only in the risk assessment of a bank, but also in the diagnosis of management behavior, but also of expectations on the valuation of a public bank (market capitalization). The emphasis in this paper is placed on loan loss provisions, as this item is highly exposed to manipulations from bank managers, according to previously conducted research. In this study, it was attempted to empirically distinguish the “objective” and ‘subjective” components of loan loss provisions in financial reporting based on a large sample of banks in the global market. The influence of a “subjective” element on the reservation of the market value of
a public bank was quantitatively evaluated. In fact, the reasons for the detection of a positive influence in the overstatement
of established reserves on the market capitalization of a bank are revealed, despite a decrease of its current profit measure. Positive correlation can be explained by the impact of the signal effects from the bank management towards the market investors regarding the future sustainability of a bank.