The contribution of on-site examination ratings to an emprircal model of bank failures
This paper investigates how well regulator examinations predict bank failures, and how best to incorporate examination information into an econometric model of time-to-failure. We estimate proportional hazard models with time-varying covariates and find that examiner ratings help explain the failure hazard. Both the overall rating of a bank's condition and management, i.e., the composite CAMELS rating, and ratings of specific components contain information. In addition, we find that the marginal "effect" of ratings is non-linear, in that the impact of a rating downgrade on the probability of failure is larger, the weaker a bank's initial rating.
|Date of creation:||1999|
|Publication status:||Published in Review of Accounting and Finance, November 2005, 4(4), pp. 110-34|
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- Berger, Allen N & Davies, Sally M & Flannery, Mark J, 2000.
"Comparing Market and Supervisory Assessments of Bank Performance: Who Knows What When?,"
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Blackwell Publishing, vol. 32(3), pages 641-667, August.
- Allen N. Berger & Sally M. Davies & Mark J. Flannery, 2000. "Comparing market and supervisory assessments of bank performance: who knows what when?," Proceedings, Federal Reserve Bank of Cleveland, pages 641-670.
- Allen N. Berger & Sally M. Davies & Mark J. Flannery, 1998. "Comparing market and supervisory assessments of bank performance: who knows what when?," Finance and Economics Discussion Series 1998-32, Board of Governors of the Federal Reserve System (U.S.).
- R. Alton Gilbert, 1993. "Implications of annual examinations for the Bank Insurance Fund," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 35-52.
- Allen N. Berger & Sally M. Davies, 1994. "The information content of bank examinations," Proceedings 55, Federal Reserve Bank of Chicago.
- Gary Whalen & James B. Thomson, 1988. "Using financial data to identify changes in bank condition," Economic Review, Federal Reserve Bank of Cleveland, issue Q II, pages 17-26.
- Jones, David S. & King, Kathleen Kuester, 1995. "The implementation of prompt corrective action: An assessment," Journal of Banking & Finance, Elsevier, vol. 19(3-4), pages 491-510, June.
- Allen Berger & Sally Davies, 1998.
"The Information Content of Bank Examinations,"
Journal of Financial Services Research,
Springer;Western Finance Association, vol. 14(2), pages 117-144, October.
- Allen N. Berger & Sally M. Davies, 1994. "The information content of bank examinations," Finance and Economics Discussion Series 94-20, Board of Governors of the Federal Reserve System (U.S.).
- Allen Berger & Sally Davies, 1994. "The Information Content of Bank Examinations," Center for Financial Institutions Working Papers 94-24, Wharton School Center for Financial Institutions, University of Pennsylvania.
- David C. Wheelock & Paul W. Wilson, 2000.
"Why do Banks Disappear? The Determinants of U.S. Bank Failures and Acquisitions,"
The Review of Economics and Statistics,
MIT Press, vol. 82(1), pages 127-138, February.
- 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.
- Robert DeYoung, 1998. "Management Quality and X-Inefficiency in National Banks," Journal of Financial Services Research, Springer;Western Finance Association, vol. 13(1), pages 5-22, February.
- Flannery, Mark J & Houston, Joel F, 1999. "The Value of a Government Monitor for U.S. Banking Firms," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(1), pages 14-34, February.
- Rebel A. Cole & Jeffery W. Gunther, 1995. "FIMS: a new monitoring system for banking institutions," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jan, pages 1-15. Full references (including those not matched with items on IDEAS)
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