Managerial efficiency and failure of U.S. commercial banks during the 2007-2009 financial crisis: was this time different?

Pilar B. Álvarez-Franco () and Diego Restrepo-Tobon ()

Revista Ecos de Economía, 2016, vol. 20, issue 43, 4-22

Abstract: Compared with previous crises few banks failed as a result of the U.S. financial crisis of 2007-2009. We investigate the role played by managerial efficiency in the non-systemic bank failures during the crisis. During previous waves of bank failures, cost-inefficient banks and banks with relatively less capital or low-quality assets were more likely to fail. Using data from 2001 to 2010, we show that profit inefficiency-our proxy for managerial inefficiency- is a robust predictor of bank failures while cost inefficiency is unrelated to them. In addition, capital adequacy lost importance in predicting non-systemic bank failures during the crisis while loan quality remained a strong predictor. Our results suggest that profit efficiency can be an important managerial indicator in monitoring banks.

Keywords: Bank Failure; Profit Efficiency; Hazard Models (search for similar items in EconPapers)
JEL-codes: D40 G21 L13 R32 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:col:000442:015646

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