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

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

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Authors

Li Xie

Xiangyun Lu



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

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Copyright Statement
This is the accepted version of the following article: Zhang, Z., Xie, L., Lu, X. and 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, which has been published in final form at https://doi.org/10.1111/coep.12105. This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.





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