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Are early market indicators of financial deterioration accurate for Too Big To Fail banks? Evidence from East Asia

Author

Listed:
  • Isabelle Distinguin

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

  • Amine Tarazi

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

Abstract

This paper investigates whether market information is reliable to predict financial deterioration of large Too Big To Fail banks in Asia. A stepwise logit model is first estimated to isolate the optimal set of accounting indicators to predict rating downgrades. The model is then extended to assess the added value of market indicators and to test for the possible presence of a Too Big To Fail effect. While some results show that market indicators bring in additional information in the prediction process, there is consistent evidence of a Too Big To Fail effect.

Suggested Citation

  • Isabelle Distinguin & Amine Tarazi, 2010. "Are early market indicators of financial deterioration accurate for Too Big To Fail banks? Evidence from East Asia," Post-Print hal-00785042, HAL.
    • Handle: RePEc:hal:journl:hal-00785042
    Note: View the original document on HAL open archive server: https://unilim.hal.science/hal-00785042
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    Keywords

    Bank; Bank Failure; Bank Risk; East Asia;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services

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