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Quantifying management's role in bank survival

Listed author(s):
  • Thomas F. Siems

Analysts often regard the quality of bank management as the most important factor in determining whether a bank fails or survives. Applying data envelopment analysis to multiple bank inputs and outputs, Thomas F. Siems presents a new model that quantitatively assesses bank management quality. This new paradigm considers a bank's essential financial intermediation functions (that is, attracting deposits to make loans and investments) to compute a scalar measure of efficiency. ; Siems' analysis confirms that management's role is important to a bank's survival. Management quality scores for surviving institutions are significantly better than those for failed banks-up to two and one-half years before failure. Banks whose managers poorly allocate resources and disregard the needs of their customers and markets have a greater chance of failing.

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Article provided by Federal Reserve Bank of Dallas in its journal Economic and Financial Policy Review.

Volume (Year): (1992)
Issue (Month): Q I ()
Pages: 29-41

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Handle: RePEc:fip:fedder:y:1992:i:qi:p:29-41
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