Bank failure prediction models: Review and outlook

Abstract

This paper presents a literature review of recent empirical contributions on bank default prediction. The topic has always been important in the banking and finance literature, but it gained increasing interest especially after the 2008–2009 global financial crisis. The significant consequences of bankruptcy cases have highlighted the need for managers and regulators to develop and adopt appropriate early warning systems. Previous studies are analysed in this review according to three different aspects: definition of default and financial distress, application of statistical and intelligent techniques, and the selection of variables. The review also proposes some possible upgrades to promote future research on the topic, that is, pointing out the potential role of non-financial information and ESG (Environmental, Social and Governance) variables as a determinant in the default prediction of banking institutions. While the predictive accuracy of macroeconomic information has been tested in several works, there is only limited evidence of the influence of non-financial performance on a bank's probability of default.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 27 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.