The Role of Relative Performance in Bank ... - Above Top Secret

26 FRBSF Economic Review 2008Table 5Logit Analysis Results: Small Banks Excluded, 1992–1997Dependent Variable: FAILAbsolute Relative Absolute Relative Absolute RelativeVariables closure rule closure rule closure rule closure rule closure rule closure rule(1) (2) (3) (4) (5) (6)A ijt –42.96** –73.25** –43.25** –74.18** –35.14** –71.76**(4.27) (4.88) (4.26) (4.89) (4.81) (5.39)A jt 53.44** 54.26** 50.95**(3.68) (3.70) (4.01)SIZE –2.75E–7 –4.63E–7 –2.68E–7 –4.14E–7(2.16E–7) (2.64E–7) (2.17E–7) (2.67E–7)D92 41.36** 14.90** 41.78** 15.18** 31.24** 14.47**(4.55) (1.50) (4.53) (1.50) (5.20) (1.61)D93 40.45** 13.84** 40.87** 14.13** 30.23** 13.36**(4.61) (1.53) (4.59) (1.54) (5.25) (1.64)D94 40.25** 13.89** 40.67** 14.15** 30.06** 13.36**(4.62) (1.58) (4.61) (1.58) (5.26) (1.68)D95 39.11** 12.49** 39.55** 12.78** 28.68** 11.82**(4.68) (1.69) (4.66) (1.69) (5.34) (1.80)COMMERCIAL 5.56** 4.87**(1.37) (1.56)AGRICULTURAL –0.93 1.66(4.01) (3.87)REALESTATE 1.31 1.26(0.99) (1.02)NON-INTEREST 6.15 6.55(5.32) (5.63)CD 4.22** 4.78*(1.76) (2.02)90DAYSLATE 30.83** 12.82(8.93) (10.06)DiagnosticsAIC 728.17 581.94 726.18 576.29 695.30 564.79Schwartz 769.90 632.02 776.25 634.72 795.45 673.30–2 log-likelihood 718.17 569.94 714.18 562.29 671.30 538.79# observations 31,143 31,143 31,143 31,143 31,143 31,143Pseduo R 2 classification .277 .426 .281 .434 .324 .458Type I error 61/66 59/66 61/66 56/66 60/66 55/66Type II error 0 3 0 9 2 3Total correct 99.8% 99.8% 99.8% 99.8% 99.8% 99.8%Notes: Analysis excludes banks with total assets below $50 million at any time during the sample period. * and ** indicate Wald chi-squared statistical significance at5-percent and 1-percent levels, respectively. Time dummies for years 1992 through 1995 were included in the specification. Dummy coefficient estimates are availableupon request from authors. Type II error figure represents the number of non-events incorrectly designated as events.Finally, the conditioning variables perform similarly tothe results for the entire sample. There is again little evidencethat bank size is a useful predictor of bank closure. Banksize fails to enter significantly, and both specifications appearto be insensitive to its inclusion. Among the other conditioningvariables, the COMMERCIAL ijt and CD ijt variablesare again robustly significant, while the AGRICULTURE ijt,and NON-INTERESTijt variables again fail to enter significantly.The notable changes are in the REALESTATE ijt and90DAYSLATEijt variables, which now fail to enter significantlyunder the relative closure rule specification (model 6).This discrepancy probably reflects some degree of collinearitybetween these variables, which provide information aboutloan quality and a bank’s relative performance.