Managerial efficiency and failure of U.S. commercial banks during the 2007-2009 financial crisis: was this time different?

Compared with previous crises few banks failed as a result of the U.S. financial crisis of 2007-2009. We investigate the role played by managerial efficiency in the non-systemic bank failures during the crisis. During previous waves of bank failures, cost-inefficient banks and banks with relatively less capital or low-quality assets were more likely to fail. Using data from 2001 to 2010, we show that profit inefficiency—our proxy for managerial inefficiency— is a robust predictor of bank failures while cost inefficiency is unrelated to them. In addition, capital adequacy lost importance in predicting non-systemic bank failures during the crisis while loan quality remained a strong predictor. Our results suggest that profit efficiency can be an important managerial indicator in monitoring banks.

• Autores: Álvarez-Franco, Pilar B.; Restrepo-Tobón, Diego A.
• Fecha de publicación: 2016
• Institución: Universidad EAFIT
• Repositorio: Repositorio EAFIT
• Idioma: eng
• OAI Identifier: oai:repository.eafit.edu.co:10784/11275
• Acceso en línea: http://hdl.handle.net/10784/11275
• Palabra clave: D40; G21; L13; R32; Bank Failure; Profit Efficiency; Hazard Models; Quiebra de bancos; Crisis Bancaria; Eficiencia; Modelo de Hazard
• License: Copyright (c) 2016 Pilar B. Álvarez-Franco, Diego A. Restrepo-Tobón