The Macroeconomic Cycle and Earnings Management Effect on Loan Loss Provisions: Evidence from US Banks

Estimating both static and dynamic models, this paper confirm earnings management effect and its associated effect with macroeconomic cycle on Loan Loss Provision hypotheses for US commercial banks. Moreover, the effects seem to be influenced by different loan loss provisions level. According the result, it suggests that the financial surveillance may need to be strengthened during recessionary phases, when banks are more likely to become fragile and have to manipulate earnings.