Santoso, Wimboh and Montgomery, Heather and Besar, Dwityapoetra and Hanh, Tran (2005): Coordinated failure? a cross-country bank failure prediction model. Published in: ADB Institute Discussion Paper No. 32
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This paper empirically investigates the causes of bank failures in Japan and Indonesia. Using logistic regression analysis of financial ratios, we explore the usefulness of domestic bank failure prediction models with a cross-country model that allows for cross-correlation of the error terms.
Our results suggest that loans, both as a ratio to total assets, deposits and in some cases the ratio of non-performing loans, are the most significant predictors of bank failure in both Japan and Indonesia. Regulatory capital ratios, on the contrary, do not seem to be significant indicators of failure. In addition to the domestic models, we explore the usefulness of a cross-country model of bank failure prediction and find that this model outperforms the domestic models on several diagnostic tests.
|Item Type:||MPRA Paper|
|Original Title:||Coordinated failure? a cross-country bank failure prediction model|
|Keywords:||Bankruptcy; logistic regression; early warning; logit; bank failure; bank crisis|
|Subjects:||G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation
C - Mathematical and Quantitative Methods > C2 - Single Equation Models; Single Variables > C25 - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages
|Depositing User:||Heather A. Montgomery|
|Date Deposited:||03. Sep 2011 19:15|
|Last Modified:||16. Feb 2013 08:38|
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