Failing and Merging as Competing Alternatives during Times of Financial Distress: Evidence from the Colombian Financial Crisis

Jose Eduardo Gómez-González () and Juan Mendoza

Borradores de Economia from Banco de la Republica de Colombia

Abstract: This paper studies the determinants of individual bank failures and M&A processes in Colombia during the financial crisis of the late 1990s. Using bank-specific data we estimate competing risk hazards models and find that while profitability and capitalization are the most important determinants of the probability of failing, bank´s size, efficiency and capitalization are the main determinants of the probability of participating in an integration process. All else constant, an increase in capitalization reduces the probability of disappearing, whether due to the occurrence of bankruptcy, a merge or an acquisition. However, a marginal increase in capitalization reduces significantly more the probability of bankruptcy than the probability of integration. This study is the first to present a competing risks hazard model to identify covariates that excerpt significant influence on the probability of failing or merging for banks of an emerging economy.

Keywords: Survival analysis; Competing risk models; Colombia. (search for similar items in EconPapers)
JEL-codes: C25 G21 G33 (search for similar items in EconPapers)
Date: 2010-02
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https://doi.org/10.32468/be.588 (application/pdf)

Related works:
Journal Article: Failing and Merging as Competing Alternatives during Times of Financial Distress: Evidence from the Colombian Financial Crisis (2012)
Working Paper: Failing and Merging as Competing Alternatives during Times of Financial Distress: Evidence from the Colombian Financial Crisis (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:bdr:borrec:588

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