Characteristics of failed U.S. commercial banks: an exploratory study |
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Authors: | Fatima Alali Silvia Romero |
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Affiliation: | 1. California State University, Fullerton, CA, USA;2. Monclair State University, Montclair, NJ, USA |
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Abstract: | 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. |
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Keywords: | Bank failure prediction Banks survival analysis Benford’ s law G21 G33 |
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