은행의 대손충당금 적립수준이 자본조달(후순위채 발행)에 미치는 영향

Banks with low capital ratio are directly regulated by the financial supervisory board. Low capital ratio is also negatively related to incentives for managers such as monetary compensation. Therefore, managers have sufficient motivation to increase BIS capital adequacy ratio by using their discretion. It is possible for banks to increase BIS capital adequacy ratio by two directions. Specifically, one is through primary capital and the other is through secondary capital. The former is increased by issue of new shares or ordinary business activities, the latter is increased by flotation of subordinated notes and debentures. In actuality, it is easy to increase BIS capital adequacy ratio through secondary capital rather than through primary capital because of the realizability and restriction such as financing, market circumstance. Therefore, subordinated notes and debentures can be an important means to increase BIS capital adequacy ratio. In addition, prior empirical studies present that banks are managing their reported earnings and BIS capital adequacy ratio by adjusting loan loss provisions. The loan loss provisions are expenses that erode a bank’s earnings and the BIS capital adequacy ratio. According to this conjecture, this study empirically investigates the effects of loan loss provisions on the flotation of subordinated notes and debentures in Korean banks. the hypothesis is that banks with larger bad debt expenses are likely to be highly dependent on subordinated notes and debentures to increase BIS capital adequacy ratio. Consistent with the prediction, bad debt expenses of banks is positively related to the flotation of subordinated notes and debentures. This implies that banks with large bad debt expenses are have larger subordinated notes and debentures. This paper's result will provide external investor and financial supervisory authorities with useful information about bank's financial soundness. More specifically, external investor will make better use of information of subordinated notes and debentures for effective investment decision making. Also this suggests that financial supervisory authorities lead to disclosure of the details relating to BIS capital adequacy ratio and need to strengthen the regulation policy to increase BIS capital adequacy ratio.