A dual early warning model of bank distress.

Papanikolaou, N.I., 2017. A dual early warning model of bank distress. Working Paper. Poole, England: Bournemouth University.

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Abstract

We contribute to the better understanding of the key factors related to the operation of the banking system that led to the global financial crisis through the development of a dual earning warning model that explores the joint determination of the probability of a distressed bank to face a licence withdrawal or to be bailed out. The underlying patterns of distress are analysed based upon a wide spectrum of bank specific and environmental factors. We obtain precise parameter estimates and superior in- and out-of-sample forecasts. Our results show that the determinants of failures and those of bailouts differ to a considerable extent, revealing that authorities treat a distressed bank differently in their decision to let it fail or to bail it out. Overall, we provide a reliable mechanism for preventing welfare losses due to bank distress.

Item Type:Monograph (Working Paper)
Additional Information:BAFES11: Bournemouth Accounting, Finance & Economic Series NO 11 / 2017
Uncontrolled Keywords:financial crisis; bank distress; early warning model; forecasting power
Group:Faculty of Management
ID Code:30433
Deposited By: Unnamed user with email symplectic@symplectic
Deposited On:28 Feb 2018 15:01
Last Modified:28 Feb 2018 15:02

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