Relevance of Size in Predicting Bank Failures

Abstract

Employing a statistical model-building strategy, this study aims to empirically analyse the United States’ bank failures across different size categories (small, medium, and large). Our results suggest that factors associated with bank failures vary across respective size categories, and the Average Marginal Effects (AMEs) of mutually significant covariates also exhibit significant variability across different size classes of banks. The results are robust to up-to three years of lagged regression estimates, various control variables, interaction between bank size and bank charter, alternative bank size classifications, and macroeconomic crisis periods.