Does efficiency help banks survive and thrive during financial crises?

Assaf, A.G. and Berger, A.N. and Roman, R.A. and Tsionas, M.G. (2019) Does efficiency help banks survive and thrive during financial crises? Journal of Banking and Finance, 106. pp. 445-470. ISSN 0378-4266

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We examine how bank efficiency during normal times affects survival, risk, and profitability during subsequent financial crises using data from five U.S. financial crises and preceding normal times. We find that cost efficiency during normal times helps reduce bank failure probabilities, decrease risk, and enhance profitability during subsequent financial crises, while profit efficiency has limited benefits. Results suggest that cost efficiency better measures management quality, while profit efficiency may partially reflect temporary high returns from risky investments during normal times. Findings have policy implications and imply that improving bank cost efficiency during normal times may promote better financial crisis performance.

Item Type:
Journal Article
Journal or Publication Title:
Journal of Banking and Finance
Additional Information:
This is the author’s version of a work that was accepted for publication in Journal of Banking and Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Banking and Finance, 106, 2019 DOI: 10.1016/j.jbankfin.2019.07.013
Uncontrolled Keywords:
?? financeeconomics and econometrics ??
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Deposited On:
12 Aug 2019 14:30
Last Modified:
11 Jan 2024 00:21