Working Paper

Why do banks disappear? The determinants of U.S. bank failures and acquisitions

Abstract: This paper examines the determinants of individual bank failures and acquisitions in the United States during 1984-1993. We use bank-specific information suggested by examiner CAMEL-rating categories to estimate competing-risks hazard models with time-varying covariates. We focus especially on the role of management quality, as reflected in alternative measures of x-efficiency and find the 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 its acquisition.

Keywords: Bank failures;

Status: Published in Review of Economics and Statistics, February 2000, 82(1), pp. 127-38

Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Working Papers

Publication Date: 1995

Number: 1995-013