How Accurately Can Z‐score Predict Bank Failure?

作者：Laura Chiaramonte, Hong Liu, Federica Poli, Mingming Zhou · 发表于：Financial Markets Institutions and Instruments · 年份：2016 · DOI：10.1111/fmii.12077 · 被引用次数：102 · 研究领域：Banking stability, regulation, efficiency、Credit Risk and Financial Regulations、Financial Distress and Bankruptcy Prediction

Bank risk is not directly observable, so empirical research relies on indirect measures. We evaluate how well Z‐score, the widely used accounting‐based measure of bank distance to default, can predict bank failure. Using the U.S. commercial banks’ data from 2004 to 2012, we find that on average, Z‐score can predict 76% of bank failure, and additional set of other bank‐ and macro‐level variables do not increase this predictability level. We also find that the prediction power of Z‐score to predict bank default remains stable within the three‐year forward window.