Determinants of bank closures: Do changes of CAMEL variables matter?

Arbeitspapier

This study examines whether changes in CAMEL variables matter in explaining bank closure. Using a unique set of monthly bank-specific balance sheet data from Russia, we estimate determinants of bank license withdrawals during 2013m7-2017m7. We make two key findings. First, changes in CAMEL indicators are always significantly correlated with probability of bank closure, and the magnitude of parameter estimates decreases with the lag length. Second, while the one-month lagged levels of capital, earnings, and liquidity are significantly associated with the probability of bank closure in the subsequent month, the level of liquidity is the only significant indicator for longer lags. Our key contribution that changes in CAMEL variables matter more than levels is robust to various robustness checks.

Object Details

• ISBN: 978-952-323-195-5
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: BOFIT Discussion Papers ; No. 16/2017

Classification and Topics

• Classification: Wirtschaft ; Financial Crises ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Mäkinen, Mikko ; Solanko, Laura
• Event: Veröffentlichung
• (who): Bank of Finland, Institute for Economies in Transition (BOFIT)
• (where): Helsinki
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/212879
• Last update: 10.03.2025, 11:44 AM CET