IDEAS home Printed from https://ideas.repec.org/a/eee/intfin/v18y2008i3p290-303.html
   My bibliography  Save this article

Too-big-to-fail: Bank failure and banking policy in Jamaica

Author

Listed:
  • Daley, J.
  • Matthews, K.
  • Whitfield, K.

Abstract

Research on the causes of bank failure has focused on developed countries, particularly the United States of America. Relatively little empirical work has examined developing countries. We examine the total population of banks in Jamaica between 1992 and 1998 and find that real GDP growth, size, and managerial efficiency were the most significant factors contributing to the failure of banks. Bank failure is defined to include bailout and regulator-induced or supervised merger. Our results suggest that there were implicit 'too-big-to-fail' policies during this period.

Suggested Citation

  • Daley, J. & Matthews, K. & Whitfield, K., 2008. "Too-big-to-fail: Bank failure and banking policy in Jamaica," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(3), pages 290-303, July.
    • Handle: RePEc:eee:intfin:v:18:y:2008:i:3:p:290-303
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1042-4431(06)00095-3
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Martin Brownbridge & Colin Kirkpatrick, 1999. "Financial Sector Regulation: The Lessons of the Asian Crisis," Development Policy Review, Overseas Development Institute, vol. 17(3), pages 243-266, September.
    2. repec:idb:wpaper:318 is not listed on IDEAS
    3. Mr. Paul Louis Ceriel Hilbers & Mr. Alfredo Mario Leone & Mr. Mahinder Singh Gill & Mr. Owen Evens, 2000. "Macroprudential Indicators of Financial System Soundness," IMF Occasional Papers 2000/007, International Monetary Fund.
    4. Pierre-Olivier Gourinchas & Rodrigo Valdes & Oscar Landerretche, 2001. "Lending Booms: Latin America and the World," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 47-100, January.
    5. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
    6. Kadri Männasoo & David G. Mayes, 2006. "Investigating the Early Signals of Banking Sector Vulnerabilities in Central and East European Emerging Markets," Chapters, in: Klaus Liebscher & Josef Christl & Peter Mooslechner & Doris Ritzberger-Grünwald (ed.), Financial Development, Integration and Stability, chapter 21, Edward Elgar Publishing.
    7. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
    8. John H. Boyd & Mark Gertler, 1993. "US Commercial Banking: Trends, Cycles, and Policy," NBER Chapters, in: NBER Macroeconomics Annual 1993, Volume 8, pages 319-377, National Bureau of Economic Research, Inc.
    9. Brenda González-Hermosillo & Ceyla Pazarbaşioğlu & Robert Billings, 1997. "Determinants of Banking System Fragility: A Case Study of Mexico," IMF Staff Papers, Palgrave Macmillan, vol. 44(3), pages 295-314, September.
    10. Martin, Daniel, 1977. "Early warning of bank failure : A logit regression approach," Journal of Banking & Finance, Elsevier, vol. 1(3), pages 249-276, November.
    11. McFadden, Daniel, 1974. "The measurement of urban travel demand," Journal of Public Economics, Elsevier, vol. 3(4), pages 303-328, November.
    12. Paola Bongini & Stijn Claessens & Giovanni Ferri, 2001. "The Political Economy of Distress in East Asian Financial Institutions," Journal of Financial Services Research, Springer;Western Finance Association, vol. 19(1), pages 5-25, February.
    13. Arturo Estrella & Sangkyun Park & Stavros Peristiani, 2000. "Capital ratios as predictors of bank failure," Economic Policy Review, Federal Reserve Bank of New York, issue Jul, pages 33-52.
    14. Mathias Dewatripont & Jean Tirole, 1994. "The prudential regulation of banks," ULB Institutional Repository 2013/9539, ULB -- Universite Libre de Bruxelles.
    15. West, Robert Craig, 1985. "A factor-analytic approach to bank condition," Journal of Banking & Finance, Elsevier, vol. 9(2), pages 253-266, June.
    16. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(1), pages 225-238.
    17. Espahbodi, Pouran, 1991. "Identification of problem banks and binary choice models," Journal of Banking & Finance, Elsevier, vol. 15(1), pages 53-71, February.
    18. David C. Wheelock & Paul W. Wilson, 2000. "Why do Banks Disappear? The Determinants of U.S. Bank Failures and Acquisitions," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 127-138, February.
    19. Demirguc, Asli & Detragiache, Enrica, 2000. "Monitoring Banking Sector Fragility: A Multivariate Logit Approach," The World Bank Economic Review, World Bank, vol. 14(2), pages 287-307, May.
    20. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
    21. Meyer, Paul A & Pifer, Howard W, 1970. "Prediction of Bank Failures," Journal of Finance, American Finance Association, vol. 25(4), pages 853-868, September.
    22. Caprio, Gerard Jr. & Klingebiel, Daniela, 1996. "Bank insolvencies : cross-country experience," Policy Research Working Paper Series 1620, The World Bank.
    23. International Monetary Fund, 1998. "Leading Indicators of Banking Crises: Was Asia Different?," IMF Working Papers 1998/091, International Monetary Fund.
    24. Asli Demirgüç-Kunt & Enrica Detragiache, 1998. "The Determinants of Banking Crises in Developing and Developed Countries," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 81-109, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ummad Mazhar & Ceyhun Elgin, 2013. "Environmental Regulation, Pollution and the Informal Economy," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 9, pages 62-81.
    2. TRENCA Ioan & MUTU Simon & COROVEI Emilia, 2014. "Improving Ews For Banking Crises: Roc And Auroc Analysis," Revista Economica, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 66(3), pages 106-118.
    3. José Eduardo Gómez González & Ines Paola Orozco Hinojosa, 2010. "Un modelo de alerta temprana para el sistema financiero colombiano," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 28(62), pages 124-147, June.
    4. Peilong Shen & Zhinan Li, 2020. "Financial contagion in inter-bank networks with overlapping portfolios," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 15(4), pages 845-865, October.
    5. Smaoui, Houcem & Mimouni, Karim & Miniaoui, Héla & Temimi, Akram, 2020. "Funding liquidity risk and banks' risk-taking: Evidence from Islamic and conventional banks," Pacific-Basin Finance Journal, Elsevier, vol. 64(C).
    6. Gutiérrez López, Cristina & Abad González, Julio, 2014. "¿Permitían los estados financieros predecir los resultados de los tests de estrés de la banca española? Una aplicación del modelo logit," Revista de Contabilidad - Spanish Accounting Review, Elsevier, vol. 17(1), pages 58-70.
    7. Jacobi, Arie & Tzur, Joseph, 2021. "Wealth distribution and probability of bank failure across countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 71(C).
    8. Daley, Jenifer & Matthews, Kent, 2009. "Efficiency and Convergence in the Jamaican banking sector 1998-2007," Cardiff Economics Working Papers E2009/30, Cardiff University, Cardiff Business School, Economics Section.
    9. Smaoui, Houcem & Ghouma, Hatem, 2020. "Sukuk market development and Islamic banks’ capital ratios," Research in International Business and Finance, Elsevier, vol. 51(C).
    10. Daley, Jenifer & Matthews, Kent & Zhang, Tiantian, 2011. "Post-crisis cost efficiency of Jamaican banks," Cardiff Economics Working Papers E2011/27, Cardiff University, Cardiff Business School, Economics Section.
    11. Maghyereh, Aktham I. & Awartani, Basel, 2014. "Bank distress prediction: Empirical evidence from the Gulf Cooperation Council countries," Research in International Business and Finance, Elsevier, vol. 30(C), pages 126-147.
    12. Abad-González, Julio & Gutiérrez-López, Cristina, 2016. "Modelización de la solvencia bancaria en escenarios adversos: aplicación a los «PIIGS»," Revista de Contabilidad - Spanish Accounting Review, Elsevier, vol. 19(2), pages 227-238.
    13. Jean-michel Sahut & Medhi Mili, 2010. "Are Mergers a Solution to Bank Distress in MENA Countries?," Economics Bulletin, AccessEcon, vol. 30(4), pages 2627-2641.
    14. Salvador Marín Hernández & Ester Gras Gil & Marcos Antón Renart, 2011. "Financial information and restructuring of spanish savings banks in a context of crisis. Changes in the regulation; content and evolution of FROB," CIRIEC-España, revista de economía pública, social y cooperativa, CIRIEC-España, issue 73, pages 99-126, October.
    15. Daley, Jenifer & Matthews, Kent, 2009. "Measuring bank efficiency: tradition or sophistication? - A note," Cardiff Economics Working Papers E2009/24, Cardiff University, Cardiff Business School, Economics Section.
    16. Smaoui, Houcem & Salah, Ines Ben & Diallo, Boubacar, 2020. "The determinants of capital ratios in Islamic banking," The Quarterly Review of Economics and Finance, Elsevier, vol. 77(C), pages 186-194.
    17. Lin, Ching-Chung & Yang, Shou-Lin, 2016. "Bank fundamentals, economic conditions, and bank failures in East Asian countries," Economic Modelling, Elsevier, vol. 52(PB), pages 960-966.
    18. Tarcisio Pedro Da Silva & Mauricio Leite & Jaqueline Carla Guse & Vanderlei Gollo, 2017. "Financial and economic performance of major Braziliancredit cooperatives," Contaduría y Administración, Accounting and Management, vol. 62(5), pages 5-6, Diciembre.
    19. Cristina Gutiérrez-López & Julio Abad-González, 2020. "Sustainability in the Banking Sector: A Predictive Model for the European Banking Union in the Aftermath of the Financial Crisis," Sustainability, MDPI, vol. 12(6), pages 1-25, March.
    20. Vithessonthi, Chaiporn, 2014. "The effect of financial market development on bank risk: evidence from Southeast Asian countries," International Review of Financial Analysis, Elsevier, vol. 35(C), pages 249-260.
    21. Daley, Jenifer & Matthews, Kent, 2009. "Measuring post-crisis productivity for Jamaican banks," Cardiff Economics Working Papers E2009/29, Cardiff University, Cardiff Business School, Economics Section.
    22. Yucel, Eray, 2011. "A Review and Bibliography of Early Warning Models," MPRA Paper 32893, University Library of Munich, Germany.
    23. Houcem Smaou & Hatem Ghouma, 2019. "Sukuk Market Development and Islamic Banks’ Capital Ratios," Working Papers 1329, Economic Research Forum, revised 21 Aug 2019.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fungáčová, Zuzana & Turk-Ariss, Rima & Weill, Laurent, 2013. "Does excessive liquidity creation trigger bank failures?," BOFIT Discussion Papers 2/2013, Bank of Finland Institute for Emerging Economies (BOFIT).
    2. Fungáčová, Zuzana & Turk-Ariss, Rima & Weill, Laurent, 2013. "Does excessive liquidity creation trigger bank failures?," BOFIT Discussion Papers 2/2013, Bank of Finland, Institute for Economies in Transition.
    3. Fiordelisi, Franco & Mare, Davide Salvatore, 2013. "Probability of default and efficiency in cooperative banking," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 26(C), pages 30-45.
    4. repec:zbw:bofitp:2013_002 is not listed on IDEAS
    5. repec:erf:erfstu:78 is not listed on IDEAS
    6. K. Batu Tunay, 2010. "Banking Crises and Early Warning Systems: A Model Suggestion for Turkish Banking Sector," Journal of BRSA Banking and Financial Markets, Banking Regulation and Supervision Agency, vol. 4(1), pages 9-46.
    7. Saadaoui, Zied, 2009. "Fonds propres réglementaires et stabilité bancaire dans les pays émergents [Capital Requirements and Banking Stability in Emerging Countries]," MPRA Paper 25217, University Library of Munich, Germany.
    8. Andrew Logan, 2001. "The United Kingdom's small banks' crisis of the early 1990s: what were the leading indicators of failure?," Bank of England working papers 139, Bank of England.
    9. Sahut, Jean-Michel & Mili, Mehdi, 2011. "Banking distress in MENA countries and the role of mergers as a strategic policy to resolve distress," Economic Modelling, Elsevier, vol. 28(1-2), pages 138-146, January.
    10. Zuzana Fungacova & Ms. Rima A Turk & Laurent Weill, 2015. "High Liquidity Creation and Bank Failures: Do They Behave Differently?," IMF Working Papers 2015/103, International Monetary Fund.
    11. Schmidt Paul-Günther, 2001. "Ursachen systemischer Bankenkrisen: Erklärungsversuche, empirische Evidenz und wirtschaftspolitische Konsequenzen," ORDO. Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft, De Gruyter, vol. 52(1), pages 239-280, January.
    12. D. Fernández-Arias & M. López-Martín & T. Montero-Romero & F. Martínez-Estudillo & F. Fernández-Navarro, 2018. "Financial Soundness Prediction Using a Multi-classification Model: Evidence from Current Financial Crisis in OECD Banks," Computational Economics, Springer;Society for Computational Economics, vol. 52(1), pages 275-297, June.
    13. Mare, Davide Salvatore, 2015. "Contribution of macroeconomic factors to the prediction of small bank failures," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 39(C), pages 25-39.
    14. Fungacova, Zuzana & Turk, Rima & Weill, Laurent, 2021. "High liquidity creation and bank failures," Journal of Financial Stability, Elsevier, vol. 57(C).
    15. Filippopoulou, Chryssanthi & Galariotis, Emilios & Spyrou, Spyros, 2020. "An early warning system for predicting systemic banking crises in the Eurozone: A logit regression approach," Journal of Economic Behavior & Organization, Elsevier, vol. 172(C), pages 344-363.
    16. Hamdaoui, Mekki, 2016. "Are systemic banking crises in developed and developing countries predictable?," Journal of Multinational Financial Management, Elsevier, vol. 37, pages 114-138.
    17. Fazelina Sahul Hamid, 2013. "The Effect of Reliance on International Funding on Banking Fragility: Evidence from East Asia," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 7(1), pages 29-60, February.
    18. POWO FOSSO, Bruno, 2000. "Les déterminants des faillites bancaires dans les pays en développement: le cas des pays de l'Union économique et monétaire Ouest-africaine (UEMOA)," Cahiers de recherche 2000-02, Universite de Montreal, Departement de sciences economiques.
    19. Pierluigi Bologna, 2011. "Is there a role for funding in explaining recent US bank failures?," Questioni di Economia e Finanza (Occasional Papers) 103, Bank of Italy, Economic Research and International Relations Area.
    20. Fabrizio Ferriani & Wanda Cornacchia & Paolo Farroni & Eliana Ferrara & Francesco Guarino & Francesco Pisanti, 2019. "An early warning system for less significant Italian banks," Questioni di Economia e Finanza (Occasional Papers) 480, Bank of Italy, Economic Research and International Relations Area.
    21. Chung‐Hua Shen & Hsing‐Hua Hsu, 2022. "The determinants of Asian banking crises—Application of the panel threshold logit model," International Review of Finance, International Review of Finance Ltd., vol. 22(1), pages 248-277, March.
    22. Loayza, Norman V. & Ranciere, Romain, 2006. "Financial Development, Financial Fragility, and Growth," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(4), pages 1051-1076, June.

    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:intfin:v:18:y:2008:i:3:p:290-303. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/intfin .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.