Title: The impact of loan loss provisions on the firm valorisation: the case of the Tunisian banking sector
Authors: Chedli Baccouche; Rim Mouelhi; Sana Ben Ghodbane
Addresses: ISCAE, Campus Universitaire, 2010, Manouba, Tunisia ' ISCAE, Campus Universitaire, 2010, Manouba, Tunisia ' IHEC, Carthage Presidence, 2016, Tunis, Tunisia
Abstract: According to national authorities and international institutions, the prospects for growth of the Tunisian economy remain very encouraging. In order to maintain and further sustain this growth, the banking sector remains a major pillar. Taking into account the prominent role it has been playing in the mobilisation of savings, the financing of the economy and the preservation of the major internal and external balances for several years; it has benefitted from a particular attention. Our study addresses the issue of the evaluation of non-productive loans and their provisioning. With a sample of ten universal Tunisian banks which have been studied over a five year period, we concluded that there is no positive correlation between the provisions' discretionary component for bad debts and the banks' cash flow. This component is positively correlated with the market value of the banks. Insufficient provisions affect the market value of the banks and create problems which could affect the Tunisian economy.
Keywords: loan loss provisions; bad debts; banking industry; banks; cash flows; market value; Tunisia; firm valorisation; economic growth; savings mobilisation; financing; internal balances; external balances; non-productive loans; provisioning; longitudinal studies; discretionary components.
African Journal of Accounting, Auditing and Finance, 2014 Vol.3 No.2, pp.130 - 142
Received: 08 May 2021
Accepted: 12 May 2021
Published online: 03 Dec 2014 *