An efficient and functional model for predicting bank distress: In and out of sample evidence

Sean Cleary and Greg Hebb

Journal of Banking & Finance, 2016, vol. 64, issue C, 101-111

Abstract: We examine the failures of 132 U.S. banks over the 2002–2009 period using discriminant analysis and successfully distinguish between banks that failed and those that didn’t 92% of the time using in-sample quarterly data. Our two most important variables are related to bank capital and loan quality, as one might expect; although bank profitability is also important. The resulting model is then used out-of-sample to examine the failure of 191 banks during 2010–11, with predictive accuracy in the 90–95% range.

Keywords: Bank failures; Financial distress; Financial crisis (search for similar items in EconPapers)
JEL-codes: G21 G33 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:64:y:2016:i:c:p:101-111

DOI: 10.1016/j.jbankfin.2015.12.001

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