BANK-SPECIFIC DECISIONS AND BANKS' PROVISIONING BEHAVIOUR IN NIGERIA: THE ROLE OF IFRS ADOPTION AND BANKS' RISKINESS

Goal: this study examines the relationship between bank loan loss provisioning behaviour and various bank-specific decisions on loan loss reporting. The evidence is derived from several cases of non-performing exposures of Nigerian deposit money banks. Methodology: to investigate the relationship between bank loan loss provisioning behaviour and various bank-specific decisions on loan loss reporting there was created the loan loss bank-specific decisions index (BDI) according to the International Financial Reporting Standards (IFRSs). The hypotheses are tested by using the estimates of panel corrected standard errors regression model. Findings: the results showed that discretionary adjustments to loan loss provisions (LLPV) are typical of Nigerian banks although the earnings manipulations imbedded in discretionary LLPVs (DLPV) are not factored in. However, during IFRS a reversal is evident suggesting bank-specific decisions prompting increased DLPV except for seemingly financially-distressed banks. These findings also confirm the relationship between BDI components and provisioning behaviour in individual tests. The study also found out that the provisioning behaviour in Nigeria during global financial crisis was pro-cyclical (nonrational) while during the local economic recession of 2016-2017, it was counter-cyclical (rational). The latter, which happened during the IFRS period, was characterized by income smoothing while the former was addressed at the level of bank-specific decisions. Originality and contributions of the author: the study contributes to the literature by testing a list of bank-specific factors engendering adjustments to loan loss decisions. It is unique in terms of the empirical reference to numerous bank-specific decisions as a single factor in accounting for loan losses. The paper also establishes the parochial success of institutional changes in the corporate Nigeria and offers useful suggestions for the way forward.