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The Losses Realized in Bank Failures
Article first published online: 30 APR 2012
DOI: 10.1111/j.1540-6261.1991.tb04616.x
1991 The American Finance Association
1540-6261/asset/cover.gif?v=1&s=5192ce61b1e4bde927ebc2df55b44b4da55ef137 "The Journal of Finance")
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How to Cite
JAMES, C. (1991), The Losses Realized in Bank Failures. The Journal of Finance, 46: 1223–1242. doi: 10.1111/j.1540-6261.1991.tb04616.x
Publication History
- Issue published online: 30 APR 2012
- Article first published online: 30 APR 2012
- Abstract
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ABSTRACT
This paper examines the losses realized in bank failures. Losses are measured as the difference between the book value of assets and the recovery value net of the direct expenses associated with the failure. I find the loss on assets is substantial, averaging 30 percent of the failed bank's assets. Direct expenses associated with bank closures average 10 percent of assets. An empirical analysis of the determinants of these losses reveals a significant difference in the value of assets retained by the FDIC and similar assets assumed by acquiring banks.