A Proposal for a Model to Prevent Bank Failure Risk in Cameroon: The Camel(s) Rating

Wissem Ajili Ben Youssef and Abdoulaye Ramadan Nsangou
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Wissem Ajili Ben Youssef: Métis Lab EM Normandie - EM Normandie - École de Management de Normandie = EM Normandie Business School
Abdoulaye Ramadan Nsangou: Adston Advisory

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Abstract: The paper aims to identify factors associated with reducing bank failure risk in Cameroon. We focus on the factors that enhance the correlation between bank size and default risk indicators, as well as the capitalization requirement and potential default. We used a panel of thirteen Cameroonian banks from 2000 to 2013. Furthermore, we estimate multiple linear models with a Z-score as a bank failure indicator. The independent variables are derived from Camel(s) models. The results support the hypothesis that banks' capitalization contributes to reducing their default risk. In Cameroon, banks with the highest capitalization are less likely to fail. Furthermore, financial institutions that provide a higher amount of credit have a higher Z-score, reducing the likelihood of default. When deposits are large, banks in Cameroon tend to invest in risky portfolios. Finally, a larger size does not induce a lower default risk for Cameroonian banks.

Date: 2023-12-12
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Published in 2nd Gulf University International Conference in Accounting and Finance, Gulf University, Dec 2023, Bahreïn, Bahrain

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04937683

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