Relevance of Size in Predicting Bank Failures
International Journal of Finance and Economics (Forthcoming)
60 Pages Posted: 31 Jul 2018 Last revised: 22 Jun 2020
Date Written: July 9, 2018
Abstract
Employing a statistical model-building strategy, this study aims to empirically analyse the United States’ bank failures across different size categories (small, medium, and large). Our results suggest that factors associated with bank failures vary across respective size categories, and the Average Marginal Effects (AMEs) of mutually significant covariates also exhibit significant variability across different size classes of banks. The results are robust to up-to three years of lagged regression estimates, various control variables, interaction between bank size and bank charter, alternative bank size classifications, and macroeconomic crisis periods.
Keywords: bank size, bank failure, default risk, survival analysis, banking
JEL Classification: G01, G21, G28
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