Distance to default, subordinated debt, and distress indicators in the banking industry

Paul Kato and Jens Hagendorff

Accounting and Finance, 2010, vol. 50, issue 4, 853-870

Abstract: The recent financial crisis has highlighted the inadequacy of present supervisory arrangements to identify reliable ex‐ante indicators of banking distress. For a sample of US bank holding companies, we analyse the extent to which distance to default based on market data can be explained using accounting‐based indicators of risk. We show that a larger number of bank fundamentals help predict default for institutions that issue subordinated debt. For banks that issue sub‐debt, we find that higher charter values and low bank capitalizations further increase the power of bank fundamentals to predict default risk.

Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
https://doi.org/10.1111/j.1467-629X.2010.00354.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:acctfi:v:50:y:2010:i:4:p:853-870

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0810-5391

Access Statistics for this article

Accounting and Finance is currently edited by Robert Faff

More articles in Accounting and Finance from Accounting and Finance Association of Australia and New Zealand Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().