The recent financial crisis and economic recession has shown that bank failure in the United States, while rare is a concern during uncertain times. Understanding the magnitude of banks at risk early in a crisis is a key challenge faced by policymakers. Early warning models are quite accurate at...

We replicate three bank failure models (Martin (1977), Cole and White (2012), and DeYoung and Torna (2013)) and introduce a new predictive model along with several evaluation methods to compare their out-of-sample predictive accuracy. We find that the models are highly accurate individually, and...

Using a large panel of US banks over the period 2008-2013, this paper proposes an early warning framework to identify bank heading to bankruptcy. We conduct a comparative analysis based on both Canonical Discriminant Analysis and Logit models to examine and to determine the most accurate one....

We compare the out-of-sample accuracy of three methodologies—the time-varying hazard model of Shumway (2001), the static probit model used by Cole and Gunther (1998), and a static logistic regression model similar to Cole and White (2012)—in forecasting U.S. bank failures. When we limit all...

The Great Financial Crisis shows that bank failure in the United States, while rare, is a concern during uncertain times. Our interest is in the ability to predict future failures at the start of a crisis, when the recent past has few events on which to base our inferences. We show that...

This paper examines the 225 banks that failed between February 2, 2007, and April 23, 2010, comparing them to a random sample of banks that had not failed as of April 23, 2010. We performed regression and discriminant analysis on quarterly call report data for one year, two years, three years,...

In this article we provide a summary of empirical results obtained in several economics and operations research papers that attempt to explain, predict, or suggest remedies for financial crises or banking defaults; we also outline the methodologies used in them. We analyze financial and economic...

In this article we provide a summary of empirical results obtained in several economics and operations research papers that attempt to explain, predict, or suggest remedies for financial crises or banking defaults, as well as outlines of the methodologies used. We analyze financial and economic...

The interest in banks’ bankruptcy prediction has rapidly increased especially after the 2008-2009 global financial crisis. The relevant consequences of bankruptcy cases have indeed highlighted the necessity for managers and regulators to develop and adopt appropriate early warning systems. The...