Are Early Market Indicators of Financial Deterioration Accurate for Too Big to Fail Banks? Evidence from East Asia

Economics Bulletin, Vol. 30, No. 2, pp. 1680-1693, 2010

Posted: 3 Oct 2010

See all articles by Amine Tarazi

Amine Tarazi

University of Limoges - Faculty of Law and Economic Science

Isabelle Distinguin

Université de Limoges, LAPE

Date Written: September 30, 2010

Abstract

This paper investigates whether market information is reliable to predict financial deterioration of large Too Big To Fail banks in Asia. A stepwise logit model is first estimated to isolate the optimal set of accounting indicators to predict rating downgrades. The model is then extended to assess the added value of market indicators and to test for the possible presence of a Too Big To Fail effect. While some results show that market indicators bring in additional information in the prediction process, there is consistent evidence of a Too Big To Fail effect.

Keywords: Bank, Bank failure, Bank risk, East Asia

JEL Classification: G21, G28

Suggested Citation

Tarazi, Amine and Distinguin, Isabelle, Are Early Market Indicators of Financial Deterioration Accurate for Too Big to Fail Banks? Evidence from East Asia (September 30, 2010). Economics Bulletin, Vol. 30, No. 2, pp. 1680-1693, 2010, Available at SSRN: https://ssrn.com/abstract=1685216

Amine Tarazi (Contact Author)

University of Limoges - Faculty of Law and Economic Science ( email )

5 rue Felix Eboue
Limoges, 87000
France

Isabelle Distinguin

Université de Limoges, LAPE ( email )

5 rue Félix Eboué BP3127
LIMOGES, 87031
France

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