Value relevance of impairment provisions in the Polish banking sector
Value relevance of impairment provisions in the Polish banking sector

Summary/Abstract: The paper aims at empirical evaluation of the value relevance of impairment provisions reported by commercial banks listed on the Warsaw Stock Exchange over the period 1998–2013. The examined sample covered 18 domestically-based banks and included 206 bank-year observations for the data from separate financial statements and 190 bankyear observations for consolidated ones. The key research method employed is a crosssectional price-deflated linear regression with ordinary least squares estimation. The results of the analysis indicate that impairment provisions reported by the listed banks in Poland are value relevant, and that increases in those provisions are on average priced negatively by equity investors. Moreover, banks’ net earnings decomposed into impairment provisions and the residual component reveal incremental explanatory power over the aggregate numbers; however, this effect fades when book value of equity is included as an additional regressor in valuation models.

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