Determinants of Financial Distress in Large Financial Institutions: Evidence from U.S. Bank Holding Companies

Zhang, Zhichao; Xie, Li; Lu, Xiangyun; Zhang, Zhuang

Abstract

We investigate determinants of financial distress in large financial institutions based on the Distance-to-Default and Z-Scores measures. Using data of U.S. bank holding companies (BHCs), we find that the housing price index is a consistently significant factor across all BHCs and the non-performing loan ratio is the most powerful indicator for financial distress. Short-term wholesale funding is also a reliable default risk indicator. We additionally find that all the three regulatory capital requirements are very important for controlling default risk, particularly in the post-crisis period. (JEL C53, G14, G21, G28)

Citation

Zhang, Z., Xie, L., Lu, X., & Zhang, Z. (2016). Determinants of Financial Distress in Large Financial Institutions: Evidence from U.S. Bank Holding Companies. Contemporary Economic Policy, 34(2), 250-267. https://doi.org/10.1111/coep.12105

• Journal Article Type: Article
• Acceptance Date: Jan 4, 2015
• Online Publication Date: Apr 14, 2015
• Publication Date: Apr 1, 2016
• Deposit Date: May 21, 2015
• Publicly Available Date: Apr 14, 2017
• Journal: Contemporary Economic Policy
• Print ISSN: 1074-3529
• Electronic ISSN: 1465-7287
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 34
• Issue: 2
• Pages: 250-267
• DOI: https://doi.org/10.1111/coep.12105
• Public URL: https://durham-repository.worktribe.com/output/1428145