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Alternative evidence and views on asymmetric loan loss provisioning
Based on a linear provision/charge-off association and V-shaped scatterplots of these variables against nonperforming loan changes, Basu et al. (2020) argue that nonperforming loan changes mis-measure credit quality and linear provision models are mis-specified. They conclude that residual asymmetry...
Autores principales: | , |
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Formato: | Online Artículo Texto |
Lenguaje: | English |
Publicado: |
Elsevier B.V.
2020
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Materias: | |
Acceso en línea: | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7501070/ http://dx.doi.org/10.1016/j.jacceco.2020.101362 |
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author | Beatty, Anne Liao, Scott |
author_facet | Beatty, Anne Liao, Scott |
author_sort | Beatty, Anne |
collection | PubMed |
description | Based on a linear provision/charge-off association and V-shaped scatterplots of these variables against nonperforming loan changes, Basu et al. (2020) argue that nonperforming loan changes mis-measure credit quality and linear provision models are mis-specified. They conclude that residual asymmetry controlling for charge-offs results from loan heterogeneity and the real estate crisis. Using additions to nonaccruals to measure credit quality, we find a linear association with provisions, that controlling for charge-offs induces misspecification, and no evidence of provision asymmetry. These results highlight the importance of basing hypotheses and causal models on theoretical underpinnings rather than on plots subject to known fallacies. |
format | Online Article Text |
id | pubmed-7501070 |
institution | National Center for Biotechnology Information |
language | English |
publishDate | 2020 |
publisher | Elsevier B.V. |
record_format | MEDLINE/PubMed |
spelling | pubmed-75010702020-09-21 Alternative evidence and views on asymmetric loan loss provisioning Beatty, Anne Liao, Scott Journal of Accounting and Economics Article Based on a linear provision/charge-off association and V-shaped scatterplots of these variables against nonperforming loan changes, Basu et al. (2020) argue that nonperforming loan changes mis-measure credit quality and linear provision models are mis-specified. They conclude that residual asymmetry controlling for charge-offs results from loan heterogeneity and the real estate crisis. Using additions to nonaccruals to measure credit quality, we find a linear association with provisions, that controlling for charge-offs induces misspecification, and no evidence of provision asymmetry. These results highlight the importance of basing hypotheses and causal models on theoretical underpinnings rather than on plots subject to known fallacies. Elsevier B.V. 2020 2020-09-19 /pmc/articles/PMC7501070/ http://dx.doi.org/10.1016/j.jacceco.2020.101362 Text en © 2020 Elsevier B.V. All rights reserved. Since January 2020 Elsevier has created a COVID-19 resource centre with free information in English and Mandarin on the novel coronavirus COVID-19. The COVID-19 resource centre is hosted on Elsevier Connect, the company's public news and information website. Elsevier hereby grants permission to make all its COVID-19-related research that is available on the COVID-19 resource centre - including this research content - immediately available in PubMed Central and other publicly funded repositories, such as the WHO COVID database with rights for unrestricted research re-use and analyses in any form or by any means with acknowledgement of the original source. These permissions are granted for free by Elsevier for as long as the COVID-19 resource centre remains active. |
spellingShingle | Article Beatty, Anne Liao, Scott Alternative evidence and views on asymmetric loan loss provisioning |
title | Alternative evidence and views on asymmetric loan loss provisioning |
title_full | Alternative evidence and views on asymmetric loan loss provisioning |
title_fullStr | Alternative evidence and views on asymmetric loan loss provisioning |
title_full_unstemmed | Alternative evidence and views on asymmetric loan loss provisioning |
title_short | Alternative evidence and views on asymmetric loan loss provisioning |
title_sort | alternative evidence and views on asymmetric loan loss provisioning |
topic | Article |
url | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7501070/ http://dx.doi.org/10.1016/j.jacceco.2020.101362 |
work_keys_str_mv | AT beattyanne alternativeevidenceandviewsonasymmetricloanlossprovisioning AT liaoscott alternativeevidenceandviewsonasymmetricloanlossprovisioning |