BANK FAILURES UNDER MANAGERIAL AND REGULATORY INEFFICIENCY

THREE DECADES OF EVIDENCE FROM TURKEY

Research output: Contribution to journalArticle

Abstract

Drawing on a comprehensive data set from Turkey (1970–2003) and using both nonparametric (data envelopment analysis) and parametric (stochastic frontier analysis) frontier methods, we estimate 16 alternative efficiency measures to study their associations with the probability of bank failures in an emerging market setting. We find that failed banks severely underperform survived banks in all forms of efficiency and that their subpar performance deteriorates closer to failure, prosperous times and bloated scales tend to precede eventual banking fatalities, managerially induced (technical) inefficiencies dominate politically induced (allocative) inefficiencies in failed banks, and banks with new ownership and affiliation with other businesses are more likely to fail. The results also caution that liquidity, capital, and currency risks combined with poor management are a lethal mix ahead of crises.

Original languageEnglish (US)
Pages (from-to)479-506
Number of pages28
JournalJournal of Financial Research
Volume40
Issue number4
DOIs
StatePublished - Dec 1 2017

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Bank failure
Inefficiency
Banking
Data envelopment analysis
Turkey
Allocative inefficiency
Liquidity risk
Fatality
Efficiency measures
Technical inefficiency
Currency risk
Stochastic frontier analysis
Emerging markets
Ownership

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance

Cite this

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title = "BANK FAILURES UNDER MANAGERIAL AND REGULATORY INEFFICIENCY: THREE DECADES OF EVIDENCE FROM TURKEY",
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