Why do banks fail? In this paper, I develop a model where a bank learns
how to be efficient - it learns from its own recent past, as well as from
its peers. Based on the model, I can build each bank’s counterfactual
efficiency: how efficient the bank could be, if it had implemented the
optimal strategy resulting from the model. The different between the
actual and ‘optimal’ efficiency is - quite literally - money left on the
table. I apply the model to large independent banks and bank holding
companies in the United States. In a setup that is similar to what was
previously used by Wheelock and Wilson (2000) and Bos et al. (2005),
I test whether and how this money left on the table predicts large bank
failures.
About the speaker
http://www.jwbbos.com/
Venue: Conference room (room 0.16 & 0.17)
Date: 09 June 2016
Time: 14:30 - 15:30
