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The failure of new entrants in commercial banking markets: a split‐population duration analysis
Author(s) -
DeYoung Robert
Publication year - 2003
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1016/s1058-3300(03)00004-1
Subject(s) - duration (music) , recession , great recession , bank failure , population , business , benchmark (surveying) , financial system , economics , monetary economics , actuarial science , demography , macroeconomics , geography , labour economics , art , geodesy , sociology , literature
Almost one in four of the new commercial banks chartered in the United States during the 1980s failed. This study uses a split‐population duration model to examine failure patterns and failure determinants for these banks and compares the results to a benchmark model estimated for small established banks. The results are consistent with a “life cycle” pattern of new bank failure: compared to small established banks, newly chartered banks are initially less likely, then substantially more likely, and finally equally likely to fail. These patterns were most extreme for banks chartered just prior to the banking recession of the late 1980s or early 1990s.