The Business Cycle and Bank Failures

Halil Kaya ()
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Halil Kaya: Department of Accounting and Finance College of Business and Technology Northeastern State University Oklahoma United States, Postal: US

Journal of Advanced Studies in Finance, 2018, vol. 9, issue 1, 5-14

Abstract: In this study we examine the relation between the business cycle and bank failures in the US We first look at the frequency of bank failures across expansionary and recessionary periods Then we examine the treatment of the failed banks by the FDIC across expansionary and recessionary periods Finally we compare the failed banks characteristics like total deposits total assets and estimated losses across expansionary and recessionary periods Our results show that the 2001 recession was not a significant period in terms of bank failures In fact in terms of failures the 2001 recession was not worse than the expansionary periods that come before and after it However our findings indicate that the 2008 recession has been much more severe compared to the 2001 recession and the expansionary periods Also the failed banks during the 2008 recession have been much larger firms with significantly higher loss figures when compared to the banks that failed during the 2001 recession and the expansionary periods Our results also show that the banks that failed during the 2001 recession had similar characteristics to the banks that failed during the expansionary periods

Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:srs:jasf00:v:9:y:2018:i:1:p:5-14

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