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

Author

Listed:
  • Isabelle Distinguin

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

  • Iftekhar Hasan

    (Fordham University, 1790 Broadway, 11th Floor, New York, NY 10019, USA - Fordham University [New York])

  • Amine Tarazi

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

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," Post-Print hal-01098715, HAL.
    • Handle: RePEc:hal:journl:hal-01098715
    DOI: 10.1504/IJBAAF.2010.037154
    Note: View the original document on HAL open archive server: https://hal.science/hal-01098715
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    References listed on IDEAS

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    Cited by:

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    3. Citterio, Alberto, 2024. "Bank failure prediction models: Review and outlook," Socio-Economic Planning Sciences, Elsevier, vol. 92(C).

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