The factors affecting the bank’s credit impairment losses by adopting IAS on PSAK 55 in Indonesia

Loan loss provisions in banks plays a vital role in maintaining the stability and health of banks, as well as fulfilling the function of banks in channeling public funds. This study aims to determine the effect of income smoothing and the behavior of procyclicality against reserves of credit losses losses, as well as the role of adoption of IAS 39 in PSAK 55 in moderating the influence of these two variables. The object of this study are conventional commercial banks that are listed on the Indonesia Stock Exchange within the research period of 2008-2017. By using purposive sampling method, I obtained 20 bank samples and 196 observations. The hypotheses in this research are tested using multiple regression analysis. This study shows that income smoothing has a positive influence on loan loss provisions, whereas procyclicality and IAS 39 adoption in PSAK 55 do not affect loan loss provisions significantly. Meanwhile, IAS 39 adoption in PSAK 55 weakens the positive influence of income smoothing, however it cannot moderate the influence of procyclicality on loan loss provisions.