Abstract
The purpose of the study is to empirically investigate how the higher allowance ratio for bank loans affects the cost of equity using Korean banks from 2002- 2015. First of all, we analyzed the impact of the higher allowance ratio on the cost of equity for Korean banks. Secondly, from the perspective of governance structure, we analyzed the existence of different impacts whether banks were affiliated with financial holding companies. The results showed an increasing impact of higher allowance ratio on the cost of equity for Korean banks. Also, we found these impacts differ whether the banks are affiliated with financial holding companies. The results indicate that the burden of higher allowance ratios for bank loans may provide negative impacts on capital markets. The higher the allowance ratio, which means the greater risk for banks, may help to increase the cost of equity concerning Korean banks.
| Translated title of the contribution | The impacts of Allowance for Doubtful Bank loans on the cost of equity: an empirical study of Korean Banks |
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| Original language | Korean |
| Pages (from-to) | 245-251 |
| Number of pages | 7 |
| Journal | 한국산학기술학회논문지 |
| Volume | 18 |
| Issue number | 5 |
| DOIs | |
| State | Published - May 2017 |