We re-examine the probabilistic foundation of the link between Z-score measures and banks' probability of insolvency, offering an improved measure of that probability without imposing further distributional assumptions. While the traditional measure of the probability of insolvency thus provides...

We empirically examine whether the way a bank might use loan loss provisions to smooth its income is influenced by its ownership concentration and the regulatory environment. Using a panel of European commercial banks, we find evidence that banks with more concentrated ownership use...

We highlight caveats arising in the application of traditional ROA-based Z-scores for the measurement of bank insolvency risk, develop alternative Z-score measures to resolve these issues, and make recommendations for best practice for the US/Europe based on the experience of the financial...