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The Effects of Management Decisions on Agricultural Bank Failures
Author(s) -
Belongia Michael T.,
Gilbert R. Alton
Publication year - 1990
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1242622
Subject(s) - balance sheet , probit model , assertion , bank failure , agriculture , probit , business , capital requirement , ordered probit , estimation , capital (architecture) , economics , balance (ability) , actuarial science , monetary economics , finance , econometrics , microeconomics , geography , incentive , medicine , management , archaeology , physical medicine and rehabilitation , computer science , programming language
The assertion that local economic conditions have been responsible for the failures of large numbers of agricultural banks is investigated by pairing solvent and failed banks within rural counties and examining whether balance sheet items alone explain differences in the probability of failure for the two groups of banks. Estimation of a probit model indicates that higher ratios of loans to assets and agricultural to total loans were associated with higher probabilities of failure; banks with higher capital ratios and those affiliated with multibank holding companies had lower probabilities of failure.