This dissertation was written as part of the MSc in International Accounting, Auditing and
Financial Management at the International Hellenic University. Banks are facing late loan
payments and loan defaults, although lending terms have changed in recent years. Loan defaults
involve costs due to the lending activity that banks must be held accountable for. Loan loss
provisions are recorded in the provisioning account included in the credit line of the banks'
financial statements in order to minimize the projected loss from the loan portfolio. This paper
examines the relationship between Loan Loss Forecasts (LLPs) and microeconomic and
macroeconomic variables. Most importantly, the main pillar of the research remains whether the
stock market price can affect the forecasts of losses in the following banking institutions.
Portugal, Italy, Greece and Spain (PIGS Banks). In addition, although stress tests, we can assess
future risks and use information about the capital adequacy and liquidity of the institution. There
will be an examination of whether they are conservative and constitute a large amount of LLP
will mark the image of a healthier and more prepared Bank to investors, thereby contributing to
market value. It was expected that the results would demonstrate that a Bank that is listed in
Portugal, Italy, Greece and Spain would produce a positive correlation between the formation of
LLPs and the stock market value.
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