The Losses Realized in Bank Failures

Christopher James

Journal of Finance, 1991, vol. 46, issue 4, 1223-42

Abstract: This paper examines the losses realized in bank failures. Losses are measured as the difference between the book value of assets and the recovery value net of the direct expenses associated with the failure. The author finds the loss on assets is substantial, averaging 30 percent of the failed bank's assets. Direct expenses associated with bank closures average 10 percent of assets. An empirical analysis of the determinants of these losses reveals a significant difference in the value of assets retained by the FDIC and similar assets assumed by acquiring banks. Copyright 1991 by American Finance Association.

Date: 1991
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