This study documents evidence on the choice of loan loss provisions by bank managers. In particular, we reexamine three hypotheses investigated by prior studies. First, we examine whether the 1990 change in capital adequacy regulations affects the relation between capital and loan loss...

This paper exploits the 1990 change in capital adequacy regulations to construct more powerful tests of capital and earnings management effects on bank loan loss provisions. We find strong support for the hypothesis that loan loss provisions are used for capital management. We do not find...