Study On Correlation Between Loan Loss Provision And Business Risk Of Commercial Bank

Preventing and resolving financial risks is the firm mission of current economic and financial work.As the main part of the finance,the development of the banking and the real economy perfectly complement each other.In the process of guidingfunds out of the virtual and into the real,loans are flowing more to private enterprises,small and micro businesses and other areas of inclusive finance,this situation increases the risk.The business risk of commercial banks refers to the fact that the actual income deviates from the expected income due to the influence of internal and external un-certainties in the operation process,leading to unstable operation and the possibility of loss or even bankruptcy.In the context of the current increase in loans,loan loss provision,as the largest accrual item of commercial banks,has a complex motivation of provision.Therefore,it is increasingly important to study whether the loan loss provision can reasonably release the business risk of commercial banks.According to the different basis of provision,loan loss provision includes discre-tionary loan loss provision and non-discretionary loan loss provision.Discretionary loan loss provision originates from the potential management motivation,which rep-resents the behavior of the autonomy,while non-discretionary loan loss provision is an objective reflection for default risk and bad debt.At present,most study use the whole loan loss provision,this method will affect accuracy of the conclusion.This paper takes A-share listed commercial banks as samples,selecting the data from 2007 to 2017 for empirical analysis.After exploring the relationship between the loan loss provision and the business risk of commercial banks,we use two-stage method to separate the discretionary and non-discretionary parts,and study the relationship be-tween the component and the business risk of commercial banks.The research results show that the loan loss provision has a positive signal transmission effect to the com-mercial bank risk,and has the effect of enlarging the risk.Among them,the discre-tionary part has a release effect on the business risk,while the non-discretionary part of provision has an accelerated amplification effect on business risk.The conclusion provides the reference and basis for the managers and supervisors in reserve provi-sion.In addition,according to the analysis results of risk causes in the operation pro-cess of commercial banks,the current capital adequacy ratio and other indicators also have an impact on the operation risk.lt is suggested that regulators regularly collect and analyze relevant data and indicators to release risk and ensure steady develop-ment.The main innovation and contributions of this article are as followed.Based on the new perspective of the management autonomy of commercial banks,this article investigates the relationship between loan lossprovision and business risk of commer-cial banks.We separate the discretionary loan loss provision from the whole,and study the relationship between the components of loan loss provision and the business risks of commercial banks,which proves the positive effect of discretionary loan loss reserve and is of great significance to the risk control of commercial banks.The re-search results are more reliable.