Loan Loss Provisions and Earnings Management in Malaysian Banking Industry

Objective – The main purpose of the study is to investigate the presence of earnings management incentive in affecting the LLP decision of commercial banks in Malaysia, focusing on the relation between loan loss provisions and earnings before tax and provisions. Methodology/Technique – This study applies the pooled Ordinary Least Square model in assessing the determinants of LLP. Findings – The empirical findings clearly indicate that the LLP in Malaysian commercial banks is affected by earnings management for that particular period Novelty – The expansion of the existing research in Malaysia in order to examine the extent to which the Malaysian banks engage in earnings and capital management, extends the period of investigation by considering the recent global financial crisis 2007-2009. Type of Paper: Empirical