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The use of accounting data to predict bank financial distress in MENA countries

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  • Isabelle Distinguin
  • Iftekhar Hasan
  • Amine Tarazi

Abstract

Using an innovative approach of following the downgrade or credit rating decisions by rating agencies, this paper develops an early-warning system of bank financial distress and critically evaluates the reliability and stability of the potential indicators or factors of banks in 13 emerging economies in the MENA region. Evidence portrays that the capital, asset quality, earnings, and liquidity ratios are accurate accounting indicators to predict bank financial distress. However, we observe that influence of factors vary across size of the banks as accounting information does not appear reliable to predict bank financial distress of small banks. By contrast, the balance sheet structure of banks (both the asset side and liability side) does not affect the accuracy of accounting indicators.

Suggested Citation

  • Isabelle Distinguin & Iftekhar Hasan & Amine Tarazi, 2010. "The use of accounting data to predict bank financial distress in MENA countries," International Journal of Banking, Accounting and Finance, Inderscience Enterprises Ltd, vol. 2(4), pages 332-356.
    • Handle: RePEc:ids:injbaf:v:2:y:2010:i:4:p:332-356
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    Cited by:

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    2. Elamer, Ahmed A. & Ntim, Collins G. & Abdou, Hussein A. & Pyke, Chris, 2020. "Sharia supervisory boards, governance structures and operational risk disclosures: Evidence from Islamic banks in MENA countries," Global Finance Journal, Elsevier, vol. 46(C).
    3. Citterio, Alberto, 2024. "Bank failure prediction models: Review and outlook," Socio-Economic Planning Sciences, Elsevier, vol. 92(C).

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