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The Losses Realized in Bank Failures


  • James, Christopher


This paper examines the losses realized in bank failures. Losses are measured as the difference between the book value of assets and the recovery value net of the direct expenses associated with the failure. The author finds the loss on assets is substantial, averaging 30 percent of the failed bank's assets. Direct expenses associated with bank closures average 10 percent of assets. An empirical analysis of the determinants of these losses reveals a significant difference in the value of assets retained by the FDIC and similar assets assumed by acquiring banks. Copyright 1991 by American Finance Association.

Suggested Citation

  • James, Christopher, 1991. " The Losses Realized in Bank Failures," Journal of Finance, American Finance Association, vol. 46(4), pages 1223-1242, September.
  • Handle: RePEc:bla:jfinan:v:46:y:1991:i:4:p:1223-42

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    References listed on IDEAS

    1. Grossman, Sanford J, 1988. "An Analysis of the Implications for Stock and Futures Price Volatility of Program Trading and Dynamic Hedging Strategies," The Journal of Business, University of Chicago Press, vol. 61(3), pages 275-298, July.
    2. Glosten, Lawrence R. & Milgrom, Paul R., 1985. "Bid, ask and transaction prices in a specialist market with heterogeneously informed traders," Journal of Financial Economics, Elsevier, vol. 14(1), pages 71-100, March.
    3. Cohen, Kalman J, et al, 1981. "Transaction Costs, Order Placement Strategy, and Existence of the Bid-Ask Spread," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 287-305, April.
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