Title: The impact of financial crisis on bank revenue management

Authors: Li Li Eng; Joohyung Ha

Addresses: Department of Business and Information Technology, Missouri University of Science and Technology, Fulton Hall, Rolla, MO 65409, USA ' Department of Accounting, School of Management, University of San Francisco, Malloy Hall, 2130 Fulton Street, San Francisco, CA 94117, USA

Abstract: This paper examines bank management of revenue through loan loss provisions (LLPs) during the period of 2003-2013. The sample period includes the financial crisis of 2008-2009, during which banks experienced revenue slowdowns owing to plunging mortgage lending activity. We examine whether LLPs are significantly different between the pre- and post-crisis periods. Our findings indicate that LLPs are not lower after the crisis; that is, banks are not using LLPs to manage earnings upward and smooth earnings in the post-crisis period. We also examine the effect of regulatory intervention on LLPs, measuring regulatory intervention using three variables: capital ratio, liquidity of assets, and bank size. Our findings indicate that banks that are less likely to face regulatory intervention are more likely to use LLPs to manage earnings upward and to smooth earnings in the post-crisis period.

Keywords: financial crisis; bank revenue management; loan loss provisions; LLPs; regulatory intervention; earnings smoothing; capital ratio; asset liquidity; bank size; banking industry; mortgage lending.

DOI: 10.1504/IJRM.2016.079820

International Journal of Revenue Management, 2016 Vol.9 No.4, pp.273 - 290

Received: 18 Feb 2016
Accepted: 14 Jul 2016
Published online: 16 Oct 2016 *

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