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Characteristics of failed U.S. commercial banks: an exploratory study
Author(s) -
Alali Fatima,
Romero Silvia
Publication year - 2013
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/j.1467-629x.2012.00491.x
Subject(s) - loan , allowance (engineering) , business , non conforming loan , real estate , financial system , participation loan , asset (computer security) , actuarial science , finance , non performing loan , economics , operations management , computer science , computer security
This study uses survival analysis to determine how early the indications of bank failure can be observed. We find that banks with high loan to asset and high personal loan to assets ratios are more likely to survive. Older banks and banks with high real estate and agricultural loans, loan loss allowance, loan charges off and non‐performing loans to assets ratio are more likely to fail. It is possible to predict survival functions of <50% for failed banks, 3 years or less before failure. Moreover, we find that most of the variables present a behaviour that departs from Benford’s Law.