Determinants of financial distress in large financial institutions: Evidence from U.S. bank holding companies

Zhichao Zhang, Li Xie, Xiangyun Lu, Zhuang Zhang

Research output: Contribution to journalArticlepeer-review

13 Citations (Scopus)

Abstract

We investigate determinants of financial distress in large financial institutions based on the Distance-to-Default and Z-Scores measures. Using data of U.S. bank holding companies (BHCs), we find that the housing price index is a consistently significant factor across all BHCs and the non-performing loan ratio is the most powerful indicator for financial distress. Short-term wholesale funding is also a reliable default risk indicator. We additionally find that all the three regulatory capital requirements are very important for controlling default risk, particularly in the post-crisis period.

Original languageEnglish
Pages (from-to)250-267
Number of pages18
JournalContemporary Economic Policy
Volume34
Issue number2
DOIs
Publication statusPublished - 1 Apr 2016
Externally publishedYes

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