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 language | English |
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Pages (from-to) | 250-267 |
Number of pages | 18 |
Journal | Contemporary Economic Policy |
Volume | 34 |
Issue number | 2 |
DOIs | |
Publication status | Published - 1 Apr 2016 |
Externally published | Yes |