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Probability of Bank Failure: The Russian Case

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  • Konstandina Natalia

Abstract

A question of explaining bank failures constitutes perhaps one of the greatest interest to banks' clients, policy-makers and regulators. Not surprisingly, for a long time, this question has been a challenge for theoretical and empirical economists. In this paper we investigate which factors affect soundness of a bank, taking into consideration micro level data, as well as macro level component. We also employ efficiency estimate, obtained with the help of DEA, to account for the quality of management. Then we use logit model and proportional hazard model with efficiency component. We find that efficiency element, together with size and regional belonging, are highly significant in all specifications, while macro variables did not seem to influence failures significantly.

Suggested Citation

  • Konstandina Natalia, 2006. "Probability of Bank Failure: The Russian Case," EERC Working Paper Series 06-01e, EERC Research Network, Russia and CIS.
    • Handle: RePEc:eer:wpalle:06-01e
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    More about this item

    Keywords

    Russia; Russian banking; failures; efficiency;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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