Research evidence suggests that

Multiple Choice

companies increase their allowance for credit losses when earnings are otherwise low and then decrease the provision when earnings are high.

companies reduce their allowance for credit losses when earnings are otherwise low and then increase the provision when earnings are high.

companies reduce their allowance for credit losses when earnings are otherwise high and then increase the provision when earnings are low.

companies increase their allowance for credit losses when earnings are otherwise high and then decrease the provision when earnings are low.