| Summary: | 碩士 === 靜宜大學 === 財務金融學系 === 103 === Prior research shows that banks have strong incentives to use loan loss provision (LLP), net charge-off (NCO) and abnormal loan loss provision (AbLLP) as means to manage earnings and capital management. Given the fact that Basel III has tightened requirements on leverage and liquidity, our study examines the relation between the ratios of leverage and liquidity and the behavior of earnings and capital management in U.S. commercial banks over the period 1999 to 2013. We use Fixed-Effects models in balanced panel data. The findings show that LLP, NCO and AbLLP consistently have a significant positive relationship with leverage ratios (measured by Tier 1 ratio, total capital ratio and common equity ratio) and a significant negative relationship with liquidity ratio (measured by liquid assets divided by deposit and short-term funding and liquid assets divided by total assets). In addition, the earnings and capital management behavior in banking has changed post financial crisis, especially for liquidity ratios that become significantly positively related to LLP and NCO. Finally, we find that the banks with high leverage may be more likely engage in earnings and capital management than the banks with low leverage when leverage ratio increases. On the other hand, the banks with low liquidity may be less likely engage in earnings and capital management than the banks with high liquidity when liquidity ratio increases.
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