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The impact of loan loss provisions on the firm valorisation: the case of the Tunisian banking sector

The impact of loan loss provisions on the firm valorisation: the case of the Tunisian banking sector 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png African Journal of Accounting, Auditing and Finance Inderscience Publishers

The impact of loan loss provisions on the firm valorisation: the case of the Tunisian banking sector

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References (21)

Publisher
Inderscience Publishers
Copyright
Copyright © Inderscience Enterprises Ltd. All rights reserved
ISSN
2046-8083
eISSN
2046-8091
DOI
10.1504/AJAAF.2014.066112
Publisher site
See Article on Publisher Site

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.

Journal

African Journal of Accounting, Auditing and Finance – Inderscience Publishers

Published: Jan 1, 2014

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