Abstract
Bank risk is not directly observable, so empirical research relies on indirect measures. We
evaluate how well Z-score, the widely used accounting-based measure of bank distance
to default, can predict bank failure. Using the U.S. commercial banks’ data from 2004 to
2012, we find that on average, Z-score can predict 76% of bank failure, and additional set
of other bank- and macro-level variables do not increase this predictability level. We also
find that the prediction power of Z-score to predict bank default remains stable within the
three-year forward window.
Lingua originale | English |
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pagine (da-a) | 333-360 |
Numero di pagine | 28 |
Rivista | FINANCIAL MARKETS, INSTITUTIONS & INSTRUMENTS |
Volume | 25 |
DOI | |
Stato di pubblicazione | Pubblicato - 2016 |
Keywords
- bank failure, financial crisis
- z-score