Income Smoothing Via Loan Loss Provisions and IFRS Implication: Evidence from Ethiopian Banks

Abstract

text Using a single stage regression that models the non-discretionary part of loan loss provisions, we establish whether Ethiopian banks use loan loss provisions to smooth their income in a country with no foreign banks and high dominance of state ownership. Existing literature suggests that banks use loan loss provisions as a tool for income smoothing. Results support bank income smoothing via loan loss provisions and need of external fund have significant positive influence on loan loss provisioning towards income smoothing practice of Ethiopian banks in anticipation to attract external funds.

Keywords: Banks, Ethiopia, IFRS, Income Smoothing, Loan Loss Provisions.

DOI: 10.7176/EJBM/11-16-06

Publication date:June 30^th 2019