Journal article
Risk taking and failure in de novo savings and loans in the 1980s
Journal of financial services research, Vol.10(3), pp.235-271
09/01/1996
DOI: 10.1007/BF00114086
Abstract
This article examines failure rates in de novo S&Ls that initiated operations during the 1980–1986 period. Overall failure rates are similar to those for existing institutions but are found to vary significantly by location, time of charter, and organizational form. Both univariate tests and results from a probability-of-failure model indicate that inadequate capital, economic stress, poor management of higher risk lending allowed by broader powers, and operating inefficiencies contributed significantly to the likelihood of failure. Use of brokered funds and rapid asset growth are also significantly related to failure likelihood. Interestingly, for those S&Ls which eventually failed, rapid asset growth and high proportions of nonperforming assets actually delayed the timing of their failure. We interpret this to be the result of regulatory forbearance. We also find significant differences between the financial characteristics of de novo and non-de novo S&Ls.
Details
- Title: Subtitle
- Risk taking and failure in de novo savings and loans in the 1980s
- Creators
- William C. Hunter - Federal Reserve Bank of ChicagoJames A. Verbrugge - University of GeorgiaDavid A. Whidbee - California State University, Sacramento
- Resource Type
- Journal article
- Publication Details
- Journal of financial services research, Vol.10(3), pp.235-271
- DOI
- 10.1007/BF00114086
- ISSN
- 0920-8550
- eISSN
- 1573-0735
- Number of pages
- 37
- Language
- English
- Date published
- 09/01/1996
- Academic Unit
- Finance
- Record Identifier
- 9984962894002771
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