Why do Banks Disappear? The Determinants of U.S. Bank Failures and Acquisitions

David Wheelock and Paul Wilson

The Review of Economics and Statistics, 2000, vol. 82, issue 1, 127-138

Abstract: This paper seeks to identify the characteristics that make individual U.S. banks more likely to fail or be acquired. We use bank-specific information to estimate competing-risks hazard models with time-varying covariates. We use alternative measures of productive efficiency to proxy management quality, and find that inefficiency increases the risk of failure while reducing the probability of a bank's being acquired. Finally, we show that the closer to insolvency a bank is (as reflected by a low equity-to-assets ratio) the more likely is its acquisition. © 2000 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

Date: 2000
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Working Paper: Why do banks disappear? The determinants of U.S. bank failures and acquisitions (1995)
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