Abstract

ALVAREZ-FRANCO, Pilar B.  and  RESTREPO-TOBON, Diego A.. Managerial efficiency and failure of U.S. commercial banks during the 2007-2009 financial crisis: was this time different?. ecos.econ. [online]. 2016, vol.20, n.43, pp.4-22. ISSN 1657-4206.  https://doi.org/10.17230/ecos.2016.43.1.

Compared with previous crises few banks failed as a result of the U.S. financial crisis of 2007-2009. We investigate the role played by managerial efficiency in the non-systemic bank failures during the crisis. During previous waves of bank failures, cost-inefficient banks and banks with relatively less capital or low-quality assets were more likely to fail. Using data from 2001 to 2010, we show that profit inefficiency-our proxy for managerial inefficiency- is a robust predictor of bank failures while cost inefficiency is unrelated to them. In addition, capital adequacy lost importance in predicting non-systemic bank failures during the crisis while loan quality remained a strong predictor. Our results suggest that profit efficiency can be an important managerial indicator in monitoring banks.

Keywords : Bank Failure; Profit Efficiency; Hazard Models..

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