Institutional ownership and income smoothing by Japanese banks through Loan Loss Provisions

Wikil Kwak, Ho Young Lee, Vivek Mande

Research output: Contribution to journalArticle

13 Citations (Scopus)

Abstract

This paper examines the association between institutional ownership and income smoothing through bank loan loss provisions for a sample of Japanese banks during the period 1991-1999. We find that as the percentage of institutional ownership of banks increases, income smoothing via loan loss provisions increases. Additional tests show that there is a significant positive relationship between the extent of income smoothing and the percentage ownership of banks by domestic financial institutions and affiliated (keiretsu) institutions. Consistent with the idea that foreign institutional holders do not play an important role in the corporate governance of Japanese banks, we do not find a significant association between foreign institutional ownership and the extent of income smoothing. Our results imply that institutional owners may play a different role in monitoring income smoothing during the recessionary period in Japan from the normal economic periods studied in most prior studies.

Original languageEnglish
Pages (from-to)219-243
Number of pages25
JournalReview of Pacific Basin Financial Markets and Policies
Volume12
Issue number2
DOIs
Publication statusPublished - 2009 Aug 13

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Income smoothing
Japanese banks
Institutional ownership
Loan loss provisions
Bank loans
Owners
Ownership
Financial institutions
Corporate governance
Monitoring
Keiretsu
Economics
Japan

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Cite this

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Institutional ownership and income smoothing by Japanese banks through Loan Loss Provisions. / Kwak, Wikil; Lee, Ho Young; Mande, Vivek.

In: Review of Pacific Basin Financial Markets and Policies, Vol. 12, No. 2, 13.08.2009, p. 219-243.

Research output: Contribution to journalArticle

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