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Explaining bank failures: deposit insurance, regulation, and efficiency Author info | Abstract | Publisher info | Download info | Related research | Statistics David C. Wheelock
Paul W. Wilson
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This paper uses micro-level historical data to examine the causes of bank failure. For state charactered Kansas banks during 19 10-28, time-to-failure is explicitly modeled using a proportional hazards framework. In addition to standard financial ratios, this study includes membership in the voluntary state deposit insurance system and measures of technical efficiency to explain bank failure. The results indicate that deposit insurance system membership increased theprobability of failure and banks which were technically inefficient were more likely to fail than technically efficient banks.
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Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number
1993-002.
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Date of creation: 1993Date of revision:
Publication status: Published in Review of Economics and Statistics, November 1995Handle: RePEc:fip:fedlwp:1993-002Contact details of provider: Postal: P.O. Box 442, St. Louis, MO 63166 Fax: (314)444-8753 Web page: http://www.stlouisfed.org/ More information through EDIRC
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Keywords: Bank failures Other versions of this item:
Article Wheelock, David C & Wilson, Paul W, 1995.
"Explaining Bank Failures: Deposit Insurance, Regulation, and Efficiency ,"
The Review of Economics and Statistics ,
MIT Press, vol. 77(4), pages 689-700, November.
[Downloadable!] (restricted) References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.: Wheelock, David C & Kumbhakar, Subal C, 1995.
"Which Banks Choose Deposit Insurance? Evidence of Adverse Selection and Moral Hazard in a Voluntary Insurance System ,"
Journal of Money, Credit and Banking ,
Blackwell Publishing, vol. 27(1), pages 186-201, February.
[Downloadable!] (restricted)
O'Driscoll, Gerald P, Jr, 1988.
"Bank Failures: The Deposit Insurance Connection ,"
Contemporary Economic Policy ,
Oxford University Press, vol. 6(2), pages 1-12, April.
Espahbodi, Pouran, 1991.
"Identification of problem banks and binary choice models ,"
Journal of Banking & Finance ,
Elsevier, vol. 15(1), pages 53-71, February.
[Downloadable!] (restricted)
Ferrier, Gary D. & Lovell, C. A. Knox, 1990.
"Measuring cost efficiency in banking : Econometric and linear programming evidence ,"
Journal of Econometrics ,
Elsevier, vol. 46(1-2), pages 229-245.
[Downloadable!] (restricted)
Kareken, John H & Wallace, Neil, 1978.
"Deposit Insurance and Bank Regulation: A Partial-Equilibrium Exposition ,"
Journal of Business ,
University of Chicago Press, vol. 51(3), pages 413-38, July.
[Downloadable!] (restricted)
Charnes, A. & Cooper, W. W. & Rhodes, E., 1978.
"Measuring the efficiency of decision making units ,"
European Journal of Operational Research ,
Elsevier, vol. 2(6), pages 429-444, November.
[Downloadable!] (restricted)
Charles W. Calomiris, 1989.
"Deposit insurance: lessons from the record ,"
Economic Perspectives ,
Federal Reserve Bank of Chicago, issue May, pages 10-30.
Grabowski, Richard & Rangan, Nanda & Rezvanian, Rasoul, 1993.
"Organizational forms in banking: An empirical investigation of cost efficiency ,"
Journal of Banking & Finance ,
Elsevier, vol. 17(2-3), pages 531-538, April.
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Mishkin, Frederic S, 1992.
"An Evaluation of the Treasury Plan for Banking Reform ,"
Journal of Economic Perspectives ,
American Economic Association, vol. 6(1), pages 133-53, Winter.
[Downloadable!] (restricted)
Gerald P. O'Driscoll, Jr., 1990.
"Banking reform ,"
Research Paper
9004, Federal Reserve Bank of Dallas.
Full
references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
Gerald P. Dwyer, Jr. & R.W. Hafer, 2001.
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Linda M. Hooks & Kenneth J. Robinson, 1996.
"Moral hazard and Texas banking in the 1920s ,"
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Robert DeYoung, 2000.
"For how long are newly chartered banks financially fragile? ,"
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Thomas B. King & Daniel A. Nuxoll & Timothy J. Yeager, 2006.
"Are the causes of bank distress changing? can researchers keep up? ,"
Review ,
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Allen N. Berger & Robert DeYoung, 1997.
"Problem loans and cost efficiency in commercial banks ,"
Finance and Economics Discussion Series
1997-8, Board of Governors of the Federal Reserve System (U.S.).
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Allen N. Berger & Robert DeYoung, 1995.
"Problem Loans and Cost Efficiency in Commercial Banks ,"
Center for Financial Institutions Working Papers
96-01, Wharton School Center for Financial Institutions, University of Pennsylvania.
Berger, Allen N. & DeYoung, Robert, 1997.
"Problem loans and cost efficiency in commercial banks ,"
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[Downloadable!] (restricted) Allen N. Berger & Robert DeYoung, 1996.
"Problem loans and cost efficiency in commercial banks ,"
Proceedings ,
Federal Reserve Bank of Chicago, issue May, pages 219-236.
Mark Carlson & Kris James Mitchener, 2005.
"Branch banking, bank competition, and financial stability ,"
Finance and Economics Discussion Series
2005-20, Board of Governors of the Federal Reserve System (U.S.).
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Jan Hanousek & Gerard Roland, 2001.
"Banking Passivity and Regulatory Failure in Emerging Markets: Theory and Evidence from the Czech Republic ,"
CERGE-EI Working Papers
wp192, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
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Other versions:
Jan Hanousek & Gerard Roland, 2001.
"Banking Passivity And Regulatory Failure In Emerging Markets: Theory And Evidence From The Czech Republic ,"
William Davidson Institute Working Papers Series
424, William Davidson Institute at the University of Michigan Stephen M. Ross Business School.
[Downloadable!] Jan Hanousek & Gerard Roland, 2002.
"Banking Passivity and Regulatory Failure in Emerging Markets: Theory and Evidence from the Czech republic ,"
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0203004, EconWPA.
[Downloadable!] Hanousek, Jan & Roland, Gérard, 2002.
"Banking Passivity and Regulatory Failure in Emerging Markets: Theory and Evidence from the Czech Republic ,"
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[Downloadable!] (restricted) J.A. Bikker, 1999.
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Robert DeYoung, 1999.
"Birth, growth, and life or death of newly chartered banks ,"
Economic Perspectives ,
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Mark Carlson & Kris James Mitchener, 2005.
"Branch Banking, Bank Competition, and Financial Stability ,"
NBER Working Papers
11291, National Bureau of Economic Research, Inc.
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Robert A. Eisenbeis & Gary D. Ferrier & Simon H. Kwan, 1999.
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Asli Demirguc-Kunt & Edward J. Kane & Luc Laeven, 2007.
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Other versions: Camacho-Gutiérrez, Pablo & González-Cantú, Vanessa M., 2007.
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Robert DeYoung & Iftekhar Hasan & William C. Hunter, 1999.
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99-066, New York University, Leonard N. Stern School of Business-.
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Anca Podpiera & Jiri Podpiera, 2005.
"Deteriorating Cost Efficiency in Commercial Banks Signals an Increasing Risk of Failure ,"
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2005/06, Czech National Bank, Research Department.
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José M. Pastor & Lorenzo Serrano, 2005.
"Efficiency, endogenous and exogenous credit risk in the banking systems of the Euro area ,"
Applied Financial Economics ,
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Konstandina Natalia, 2006.
"Probability of Bank Failure: The Russian Case ,"
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David C. Wheelock & Paul W. Wilson, 1995.
"Why do banks disappear? The determinants of U.S. bank failures and acquisitions ,"
Working Papers
1995-013, Federal Reserve Bank of St. Louis.
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Other versions: José Manuel Pastor Monsálvez, 1999.
"- Credit Risk And Efficiency In The European Banking Systems: A Three-Stage Analysis ,"
Working Papers. Serie EC
1999-18, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
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Masami Imai, 2006.
"Market Discipline and Deposit Insurance Reform in Japan ,"
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2006-007, Wesleyan University, Department of Economics.
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Robert DeYoung & Gary Whalen, 1999.
"Banking Industry Consolidation: Efficiency Issues ,"
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9906011, EconWPA.
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Adriana Soares Sales & Maria Eduarda Tannuri-Pianto, 2007.
"Explaining Bank Failures in Brazil: Micro, Macro and Contagion Effects (1994-1998) ,"
Working Papers Series
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