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Robust lessons learned from bank failures during the Great Financial Crisis

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  • Cullen F. Goenner

    (University of North Dakota)

Abstract

Several empirical studies have identified unique characteristics of banks that subsequently failed during the Great Financial Crisis. The notion is that by identifying these risk characteristics we are better able to monitor and regulate the risks to banks during the next crisis. A concern is bank failure is a relatively rare event, therefore inferences based on a single model specification can be sensitive to the choice of variables. We re-examine three studies (DeYoung and Torna in J Financ Intermed 22:397–421, 2013; Jin et al. in J Bank Finance 35:2811–2819, 2011; Ng and Roychowdhury in Rev Acc Stud 19:1234–1279, 2014) of bank failures during the Great Financial Crisis to determine whether these authors’ main findings are robust to accounting for uncertainty in the model’s specification. Our results indicate their results are not robust and that the causes of bank failures during the Great Financial Crisis are similar to those of past periods of crisis and are driven by traditional measures of risk.

Suggested Citation

  • Cullen F. Goenner, 2024. "Robust lessons learned from bank failures during the Great Financial Crisis," Review of Quantitative Finance and Accounting, Springer, vol. 62(2), pages 449-498, February.
    • Handle: RePEc:kap:rqfnac:v:62:y:2024:i:2:d:10.1007_s11156-023-01213-9
    DOI: 10.1007/s11156-023-01213-9
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    References listed on IDEAS

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    More about this item

    Keywords

    Bank failure; Model risk; Audit quality; Loan loss reserves; Banking crisis;
    All these keywords.

    JEL classification:

    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • 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

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