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Investigating the solvency of brazilian credit unions using a proportional hazard model

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  • Marcelo J. Braga
  • Valéria G. Fully Bressan
  • Enrico A. Colosimo
  • Aureliano A. Bressan

Abstract

Due to high interest rates and bank spreads, the number of credit unions in Brazil has increased over recent years. As financial institutions, these cooperatives need tools to signal impending financial problems. This paper focuses on one tool that can be used to evaluate credit union solvency: the Cox Proportional Hazards Model. A sample of 80 credit unions from the Brazilian state of Minas Gerais was selected to supply data. The analysis period is between December 2001 and June 2003. The results indicate that the relevant indicators for insolvency prediction are, in descending order of predictive ability, General Liquidity, Salary and Benefit Expenses, and the Loan/Equity Ratio. In general, results produced using the delineated theoretical model were in consonance with international literature. Copyright CIRIEC, 2006.

Suggested Citation

  • Marcelo J. Braga & Valéria G. Fully Bressan & Enrico A. Colosimo & Aureliano A. Bressan, 2006. "Investigating the solvency of brazilian credit unions using a proportional hazard model," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 77(1), pages 83-106, March.
  • Handle: RePEc:bla:annpce:v:77:y:2006:i:1:p:83-106
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    Cited by:

    1. Lin, Ching-Chung & Yang, Shou-Lin, 2016. "Bank fundamentals, economic conditions, and bank failures in East Asian countries," Economic Modelling, Elsevier, vol. 52(PB), pages 960-966.

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