Bank liability structure, FDIC loss, and time to failure: A quantile regression approach

Klaus Schaeck*

*Corresponding author for this work

Research output: Contribution to journalArticle (Academic Journal)

24 Citations (Scopus)

Abstract

Deposit insurers are particularly concerned about high-cost failures. When the factors driving such failures differ systematically from the determinants of low- and moderate-cost failures, a new estimation technique is required. Using a sample of more than 1,000 bank failures in the U.S. between 1984 and 2003, I present a quantile regression approach that illustrates the sensitivity of the dollar value of losses in different quantiles to my explanatory variables. These findings suggest that reliance on standard econometric techniques results in misleading inferences, and that losses are not homogeneously driven by the same factors across the quantiles. I also find that liability composition affects time to failure.

Original languageEnglish
Pages (from-to)163-179
Number of pages17
JournalJournal of Financial Services Research
Volume33
Issue number3
DOIs
Publication statusPublished - Jun 2008

Keywords

  • Bank liability structure
  • Loss given default
  • Market discipline
  • Quantile regression
  • Time to failure

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