MACROECONOMIC FACTORS AND SMALL BANK FAILURES 12+

📓 This research uses bank-level data and macroeconomic factors to assess the following two questions: (1) Does the external environment influence the occurrence of failure of small banks? (2) In terms of goodness-of-fit, do macroeconomic indicators improve model performance? These issues are addressed for the Italian Cooperative Banks using an unbalanced panel model. The results show that local geographical variables do matter in the estimation of the probability of failure and that model performance improves after their introduction in the analysis.