Does efficiency help banks survive and thrive during financial crises?

A. George Assaf, Allen N. Berger, Raluca Roman () and Mike Tsionas

Journal of Banking & Finance, 2019, vol. 106, issue C, 445-470

Abstract: We examine how bank efficiency during normal times affects survival, risk, and profitability during subsequent financial crises using data from five U.S. financial crises and preceding normal times. We find that cost efficiency during normal times helps reduce bank failure probabilities, decrease risk, and enhance profitability during subsequent financial crises, while profit efficiency has limited benefits. Results suggest that cost efficiency better measures management quality, while profit efficiency may partially reflect temporary high returns from risky investments during normal times. Findings have policy implications and imply that improving bank cost efficiency during normal times may promote better financial crisis performance.

Keywords: Banking; Efficiency; Financial crises; Performance; Survival; Risk; Profitability (search for similar items in EconPapers)
JEL-codes: G18 G21 G28 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (37)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:106:y:2019:i:c:p:445-470

DOI: 10.1016/j.jbankfin.2019.07.013

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