Research On The Impact Of Competition On Commercial Bank Loan Loss Provisioning

Commercial banks are an important financing channel for most enterprises in China,and an indispensable part of financial institutions.They play a key role in promoting the steady operation of the national economy.With the relaxation of bank access conditions,the interest rate marketization reform and the approach of Internet finance,the number and scale of commercial banks have grown rapidly,businesses have become increasingly complex and competition has become increasingly fierce.The importance of loans to commercial banks is self-evident.Loan loss preparation is a key item used by commercial banks to compensate for expected credit losses and increase banks’ ability to resist risks.The defect of the incurred loss model for provisioning loan loss was accused of being the root cause of the 2008 financial crisis,and the expected loss model introduced later can make up for the shortcomings of the previous model.However,this model gives the bank management the discretionary space to expand and requires more subjective judgment.In the context of the Chinese system,it is of great theoretical and practical significance to study the impact of banking competition on the provision of loan losses.This paper is guided by financial accounting theory,information asymmetry theory,commercial bank risk management theory,competition theory,financial supervision theory,based on the financial data of China’s listed commercial banks from 2007 to 2017,using text analysis to measure competition,establish models,analyze The impact of banking competition on the provision for loan losses.The results show that when competition increases,management will reduce the provision for loan loss;strong supervision and high-quality audit can restrain the negative impact of competition on loan loss preparation.Further exploration found that market constraints can also promote the full provision of loan loss provisions.In order to reduce the impact of competitive pressure,the Chinese government should steadily promote the reform of the banking industry.The regulatory authorities should strengthen the supervision of the provision for loan losses of commercial banks.Commercial banks should also improve their own governance systems,improve control and forecasting of risks,and strive to improve the competitiveness of banks themselves.