The paper examines the informational content of market data when these data are incorporated into traditional models that predict bank failures. To assess whether financial markets can provide timely information about firm distress, we first examine the pre-failure behavior of market variables...

The purpose of this article is to assess the relationship, in timing and magnitude, between equity market valuations of commercial banks and thrift institutions and changes in the supervisory ratings for these organizations. In particular, we ask two questions: to what extent do market variables...

This paper assesses the extent to which stock market information may help bank regulators identify bank financial distress. The research specifies a variety of stock return and other market-related variables that might contain elements of longer-term trends and be capable of anticipating changes...

Outside monitors provide important information that can help stockholders, creditors, regulators and other stakeholders apply market discipline. In the banking industry, government examiners are an additional outside monitor but with one important difference: bank examination ratings are not...

This paper quantifies the short-term and long-term impact of bank supervision (measured using CAMEL composite and component ratings) on different categories of loan growth: (a) commercial and industrial loans, b) consumer loans, and (c) real estate loans. For each of these categories, we perform...

For market discipline to be effective, market factors such as changes in firm equity and debt values and returns, must influence firm decision making. In banking, this can occur directly via bank management or indirectly though supervisory examinations and oversight influencing bank management....

This paper examines whether bank holding company (BHC) risk ratings are asymmetrically assigned or biased over business cycles from 1986 to 2003. In a model of ratings determination which accounts for bank characteristics, financial market conditions, past supervisory information, and aggregate...