TY - JOUR
T1 - BANK FAILURES UNDER MANAGERIAL AND REGULATORY INEFFICIENCY
T2 - THREE DECADES OF EVIDENCE FROM TURKEY
AU - Isik, Ihsan
AU - Folkinshteyn, Daniel
N1 - Publisher Copyright:
© 2017 The Southern Finance Association and the Southwestern Finance Association
Copyright:
Copyright 2017 Elsevier B.V., All rights reserved.
PY - 2017/12/1
Y1 - 2017/12/1
N2 - 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.
AB - 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.
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U2 - 10.1111/jfir.12132
DO - 10.1111/jfir.12132
M3 - Article
AN - SCOPUS:85038848894
VL - 40
SP - 479
EP - 506
JO - Journal of Financial Research
JF - Journal of Financial Research
SN - 0270-2592
IS - 4
ER -