The Use of Accounting and Stock Market Data to Predict Bank Financial Distress : The Case of East Asian Banks

This paper investigates whether market information could add to accounting information in the prediction of bank financial distress in Asia. A stepwise logit model is first estimated to isolate the optimal set of accounting indicators and then extended to include market indicators. Dummy variables are also introduced in the model to account for the possible existence of a too-big-to-fail effect. While some results show that market indicators bring in additional information in the prediction process, there is consistent evidence of a too-big-to-fail effect