Characteristics of Failed U.S. Commercial Banks: An Exploratory Study

26 Pages Posted: 28 Nov 2013

See all articles by Fatima Alali

Fatima Alali

California State University, Fullerton

Silvia Romero

Monclair State University

Date Written: December 2013

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.

Keywords: Bank failure prediction, Banks survival analysis, Benford’s law

JEL Classification: G21, G33

Suggested Citation

Alali, Fatima A and Romero, Silvia, Characteristics of Failed U.S. Commercial Banks: An Exploratory Study (December 2013). Accounting & Finance, Vol. 53, Issue 4, pp. 1149-1174, 2013, Available at SSRN: https://ssrn.com/abstract=2360841 or http://dx.doi.org/10.1111/j.1467-629X.2012.00491.x

Fatima A Alali (Contact Author)

California State University, Fullerton ( email )

800 N State College St
Fullerton, CA 92831
United States

Silvia Romero

Monclair State University ( email )

1 Normal Ave
Montclair, NJ 07043
United States

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