Abstract

http://ssrn.com/abstract=1773031
 
 

References (35)



 
 

Citations (10)



 


 



Ability of Accounting and Audit Quality Variables to Predict Bank Failure During the Financial Crisis


Justin Yiqiang Jin


McMaster University - DeGroote School of Business

Kiridaran (Giri) Kanagaretnam


York University - Schulich School of Business

Gerald J. Lobo


University of Houston - C.T. Bauer College of Business

January 1, 2011

Journal of Banking and Finance, Vol. 35, No. 11, 2011

Abstract:     
We examine the ability of selected accounting and audit quality variables measured in a period prior to the financial crisis (i.e., the four quarters of 2006), to predict banks that subsequently failed during the financial crisis. These predictor variables include balance sheet strength, loan characteristics, financial reporting discretion, and auditor type and auditor industry specialization. We employ two sets of samples from the US: a troubled banks sample that includes banks that failed in or after 2007 as well as banks classified as being troubled based on profitability, loan quality, and balance sheet position in 2007, and a full sample that includes all banks with available required data. Using the troubled banks sample, we identify five reliable predictors of bank failure: auditor type, Tier 1 capital ratio, proportion of securitized loans, growth in loans, and loan mix. For the larger full sample of banks, we identify ten predictors of bank failure: auditor type, Tier 1 capital ratio, proportion of securitized loans, nonperforming loans, loan loss provisions, growth in commercial loans, growth in real estate loans, growth in overall loans, loan mix, and whether the bank is a public bank.

Number of Pages in PDF File: 29

Keywords: Bank Failure, Troubled Banks, Loan Quality, Loan Loss Provisions, Auditor Reputation, Financial Crisis

JEL Classification: G14, G21, M41, M42

Accepted Paper Series





Download This Paper

Date posted: March 2, 2011 ; Last revised: February 1, 2012

Suggested Citation

Jin, Justin Yiqiang and Kanagaretnam, Kiridaran (Giri) and Lobo, Gerald J., Ability of Accounting and Audit Quality Variables to Predict Bank Failure During the Financial Crisis (January 1, 2011). Journal of Banking and Finance, Vol. 35, No. 11, 2011. Available at SSRN: http://ssrn.com/abstract=1773031 or http://dx.doi.org/10.2139/ssrn.1773031

Contact Information

Justin Y. Jin
McMaster University - DeGroote School of Business ( email )
1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada
905-525-9140 ext. 26194 (Phone)
905-521-8995 (Fax)
Kiridaran Kanagaretnam (Contact Author)
York University - Schulich School of Business ( email )
4700 Keele Street
Toronto, Ontario M3J 1P3
Canada
Gerald J. Lobo
University of Houston - C.T. Bauer College of Business ( email )
Houston, TX 77204-6021
United States
713-743-4838 (Phone)
713-743-4828 (Fax)
HOME PAGE: http://www.bauer.uh.edu/acct/acctprofile.asp?search=Gerald%20Lobo
Feedback to SSRN


Paper statistics
Abstract Views: 4,042
Downloads: 1,339
Download Rank: 7,160
References:  35
Citations:  10

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 0.422 seconds