Journal Article

Quantifying management's role in bank survival

Abstract: Analysts often regard the quality of bank management as the most important factor in determining whether a bank fails or survives. Applying data envelopment analysis to multiple bank inputs and outputs, Thomas F. Siems presents a new model that quantitatively assesses bank management quality. This new paradigm considers a bank's essential financial intermediation functions (that is, attracting deposits to make loans and investments) to compute a scalar measure of efficiency. ; Siems' analysis confirms that management's role is important to a bank's survival. Management quality scores for surviving institutions are significantly better than those for failed banks-up to two and one-half years before failure. Banks whose managers poorly allocate resources and disregard the needs of their customers and markets have a greater chance of failing.

Keywords: Bank management; Bank failures;

Bibliographic Information

Provider: Federal Reserve Bank of Dallas

Part of Series: Economic and Financial Policy Review

Publication Date: 1992

Issue: Q I

Pages: 29-41