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Over the Past two and a half years banks have failed at the fastest pace since the Great Depression. These rapidly mounting bank failures have rekindled a debate surrounding the use of fair value accounting, with many arguing that fair value has exacerbated the severity of the recent financial crisis through asset devaluation and the forced sale of assets in an effort to meet capital requirements. This paper seeks to test if an entity’s exposure to fair value which includes assets available-for-sale, trading assets, and loans held-for-sale as a percent of total assets increases the probability of bank failure through testing different prediction models of bank failure that use ratios generated from publicly available Call Report data. Two models are generated from these ratios, one to determine the significance of an entity’s fair value exposure in predicting risk of failure, and the other to determine if a better model can be generated in the absence of the Fair Value Exposure/Total Assets ratio. The first model shows that Fair Value Exposure/Total Assets is a statistically significant ratio, and that the model employing Fair Value Exposure/Total Assets has greater bank failure predictive power than the second model that excludes this ratio. Contrary to expectations, the study determines that greater fair value exposure actually decreases a bank’s risk of failure, rather than increases it. A number of possibilities as to why this may be are presented in the conclusion of the paper.

The recent U.S. subprime mortgage crisis rapidly spread throughout the world and put the global financial system under extraordinary pressure. The main implication of the recent crisis is that complex banking regulations failed to adequately identify and limit riskiness of banking systems at both domestic and international levels. In spite of a large empirical literature on the causes and remedies of the recent crisis, there remains substantial uncertainty on (i) how risk measuring models performed during crisis, (ii) how systematic factors such as house prices affected the financial system, and (iii) how effectively government policy responses resolved the financial crisis. This thesis seeks to narrow this gap in the literature by offering three empirical essays. The first essay investigates the performance of alternative parametric VaR models in forecasting riskiness of international equity portfolios. Notably, alternative univariate VaR models are compared to multivariate conditional volatility models with special focus given to conditional correlation models. Conditional correlation models include the constant conditional correlation (CCC), dynamic conditional correlation (DCC), and asymmetric DCC (ADCC) models. Various criteria are then applied for backtesting VaR models and to evaluate their one-day-ahead forecasting ability in a wide range of countries and during different global financial conditions. It is found that most VaR models have satisfactory performance with small number of violations during pre-crisis period. However, the number of violations, mean deviation of violations, and maximum deviation of violations dramatically increase during crisis period. Furthermore, portfolio models incur lower number of violations compared to univariate models while DCC and ADCC models perform better than CCC models during crisis period. From risk management perspective, most single index models fail to pass Basel criteria for internal VaR models during crisis period, whereas empirical evidence on the choice between CCC, DCC, and ADCC models is mixed. The recent crisis also raised serious concerns about factors that can systematically destabilise the whole banking system. In particular, the collapse of house prices in the United States triggered the recent subprime mortgage crisis, which was associated with a sharp increase in the number of nonperforming loans and bank failures. This in turn demonstrates the key role that house prices play in systematically undermining the whole banking system. The second essay investigates the determinants of nonperforming loans (NPL) with a special focus on house price fluctuations as a key systematic factor. Using a panel of U.S. banking institutions from 1999 to 2012, the analysis is carried out across different loan categories, different types of banks, and different bank size. It is found that house price fluctuations have a significant impact on the evolution of nonperforming loans, while the magnitude of their impact varies across loan categories, institution types, and between large and small banks. Also, the impact of house price fluctuations on nonperforming loans is more pronounced during crisis period. The last essay of this thesis investigates the effectiveness of the U.S. government strategy to combat the crisis. As a comprehensive response to the recent financial crisis, the US government created the Troubled Asset Relief Program (TARP). The Capital Purchase Program (CPP) was launched as an initial program under the TARP. The CPP was designed to purchase preferred stocks or equity warrants from viable financial institutions. Using a large panel of the U.S. commercial banks over the period 2007Q1 to 2012Q4, survival analysis is used to investigate the impact of TARP funds on the likelihood of survival in the recipient banks. It is found that larger recipient banks are more likely to avoid regulatory closure, while receiving capital assistance does not effectively help banks to avoid technical failure. This implies that governmental capital assistance serves larger banks much better than their smaller counterparts. In addition, TARP recipients are more likely to be acquired, regardless of their size and financial health. In summary, the empirical findings reveal that capital infusions do not enhance the survival likelihood of the recipient banking institutions.

The Nigerian banking system is presently riddled with distress, insolvency, and failure. The system is passing through what might seem the roughest phase in its history. The present bank distress and insolvency have culminated in the failure of many banks. In an attempt to correct this unhealthy development, the regulatory authorities (CBN and NDIC) have devised and implemented many novel policies to check this drift. Despite their efforts, however, the cankerworm continues to eat deeper into the Nigerian banking system. This study seeks to identify significant factors that might explain Nigeria's banking system failure as perceived by bank officials, and to recommend ways to minimize bank failure in Nigeria. The banking authorities, to a large extent, focused on a single cause of bank failure, such as unprofessionalism on the part of bank personnel. The majority of those interviewed accused them of committing fraud. The study showed that during the era of bank deregulation, a wider array of factors might have contributed to bank failure. The factors identified in this study are as follows: 1. The acute shortage of experienced and seasoned banking professionals during the era of banking deregulation led to an increase of forgeries and other abuses. 2. The inconsistent and frequent changes in macroeconomic policies during the period under study have negatively affected other macro-economic indicators. 3. Some factors during the period under investigation led to some banks' inability to meet standards set by the CBN/NDIC in respect to: capital adequacy, asset quality, management profile, earnings strength, and liquidity guidelines. 4. Lack of central bank independence contributed to bank failure. This study is important because the proposed recommendations would be of interest to operators of the banking industry, to regulators in the industry, as well as to the Nigerian government in its efforts to chart a new course in the Nigerian banking industry in the twenty-first century.

Ghanaian banks struggle to maintain sufficient capital after the Bank of Ghana increased the minimum capital requirement as a buffer against the 2008 financial crisis. Grounded in the efficient structure theory (EST), the purpose of this correlational study was to examine the relationships between efficiency, size, risk, and ownership structure on banks' performance when minimum capital requirement increases. Archival data were collected from PricewaterhouseCoopers website covering all Ghanaian banks with available data for the 5-year period ending 2013. Initial one tail paired sample t tests revealed significant increases over time for efficiency, t(21) = 3.849, p -?¤ .001, net interest margin (NIM), t(21) = 5.201, p -?¤ .001, return on equity (ROE), t(21) = 1.833, p -?¤ .041, and risk t(21) = 3.614, p -?¤ .001. The results of the multiple regression analysis indicated the EST models could significantly predict bank performance for the 5-year period ending 2013. X-efficiency model could predict NIM F(8, 123) = 6.94, p =.00, R2 = .288, efficiency and ownership type were statistically significant with efficiency (t = 6.09, p -?¤ .001) denoting higher to the model than foreign banks (t = 2.96, p -?¤ .004). While, scale efficiency model could predict ROE, F(8, 123) = 5.18, p =.00, R2 = .133, ownership type and size were statistically significant with State banks (t = -2.26, p -?¤ .025) denoting more to the model than size (t = 2.00, p -?¤ .047). Society can benefit from the results of this doctoral study because investors, bank of Ghana, and bank managers could better predict the banks' performance based on the information from the study, which may lead to a higher families' confidence in the positive contribution of banks in their communities.

This dissertation includes three chapters which are three papers on banking mergers and acquisitions. Bank failure and bank takeover are major risks which cause a bank to cease to exist, and Chapter 1 focuses on analyzing the factors which indicate bank takeover target vs. bank failure. The target banks would be integrated into acquiring banks, and the performance of the acquiring banks may change post the takeovers. Therefore Chapter 2 focuses on the impact of bank acquisition on the acquiring bank in the U.S.. Chapter 3 focuses on the prediction field and compares two different methodologies (multinomial logistic regression and machine learning method of XGBoost) on the prediction of bank failure or takeover. Chapter 1, titled FACTORS THAT INDICATE BANK TAKEOVER TARGET VS. BANK FAILURE, analyzes the mergers and acquisitions data for the US banking industry from 2001 to late 2015, using both multinomial logistic method and competing risk proportional hazard method, to see how the financial ratios and bank specific features affect the risk of bank failure, bank takeover by a correlated bank under the same ultimate parent bank holding company, and bank takeover by an independent bank with a different ultimate parent bank holding company. This chapter also analyzes the characteristics of failed banks and the target banks in different stages in the financial economic cycle. The results show that the failed banks or the banks which were taken over by independent banks have lower capital ratio, higher real estate loan ratio and commercial and industrial loan ratio, higher non-performing loan ratio, lower after tax profit ratio, higher operating profit ratio, higher liquidity ratio, younger age and smaller asset growth ratio than the baseline banks which continue to operate as usual during the through the cycle period. One notable difference between these two risks is that failed banks tend to be of bigger size, while the acquired banks tend to be of smaller size. Banks which were taken over by correlated banks exhibit higher equity ratio, higher commercial and industrial loan ratio, lower after tax profit ratio, lower liquidity ratio, bigger size, smaller asset growth ratio and younger age compared to the baseline banks which continue to operate as usual during the through the cycle period. The results show the three risk events are subject to some extent of sensitivity to different stages in the financial economic cycle, with the risk of bank takeover by a correlated bank has most sensitivity. The results also show there is small sensitivity observed for the factors indicating the three risks to the methodology utilized. Chapter 2, titled IMPACT OF BANK ACQUISITION ON THE ACQUIRING BANK IN THE U.S., focuses on the merger and acquisition activities in the U.S. banking industry between 2003 and 2014 and analyzes the data to see the effects of the merger and acquisition on the acquiring banks' performance post the event. This chapter selects performance measures of financial ratios implied in CAMEL measure, uses both group time difference-in-difference method and quantile difference-in-difference method to see the impacts. The results show that not all the financial ratios have been significantly impacted by the merger and acquisition, and the impacts show some variations depending on which stages in an economic cycle the mergers and acquisitions are conducted in. Equity ratio, commercial and industrial loan ratio, delinquent assets ratio, non-performing assets ratio and return on equity ratio show significant impact from the mergers and acquisitions for all the three stages across the economic cycle. The results also show that there are variations of merger and acquisition effects on the performance measures depending on whether they are in high end or low end of their distributions. Chapter 3, titled PREDICTION OF U.S. BANK STATUS USING MACHINE LEARNING VS. MULTINOMIAL LOGISTIC REGRESSION, compares multinomial logistic regression methodology with machine learning method of eXtreme Gradient Boosting (XGBoost), to see which methodology can give better prediction on two types of risk events faced by U.S. banks, namely bank failure and bank takeover, using the features consisting of financial ratios on the data from 2002 to 2014. This paper also compares the most important features in each methodology. Beyond that, this paper explores SHapley Additive exPlanations (SHAP) analysis to interpret how bank features influence these two types of risk events from XGBoost method. The results show that XGBoost method gives better prediction accuracy if both developing the model and evaluating the performance on the whole length of US banking mergers and acquisitions data from 2002 to 2014, but the outperformance of XGBoost method is not obvious if developing the model in restricted in-sample data (from 2002 to 2010) and evaluating the performance using the out-of-sample data (from 2011 and 2014). Both two methodologies can give better prediction accuracy on the risk of bank failure than the risk of bank takeover. In addition, the most important features from XGBoost method and multinomial logistic regression method are highly aligned, with non-operating expense ratio, net after tax income ratio, equity ratio, non-performing asset ratio are the top important features. Finally, the SHAP analysis on XGBoost model shows that the features contribute to the targeted risks in a non-linear way. / Economics

The 2008-2009 global financial crisis resulting in some banks collapsing has raised questions about the corporate governance of financial institutions. Some bank managers lack an understanding of the role of corporate governance in preventing bank failures. In this multiple case study, data were collected through interviews and triangulated with annual reports to explore the strategies some bank managers need to improve their understanding of the role of corporate governance in preventing bank failures in Zimbabwe. The 7 study participants were purposefully recruited from a larger population of 19 bank managers responsible for corporate governance and compliance operating in Zimbabwe between 2009 and 2015. This study was grounded in the concept of corporate governance using the agency theory. The central research question explored strategies bank managers can employ to improve their understanding of the role of corporate governance in preventing bank failures in Zimbabwe. The transcribed interviews were coded to generate themes and validated through member checking. Four themes emerged from the research: the need for improvement on compliance to corporate governance policies and regulations, recruitment of qualified and competent directors who should be independent non executive in majority, risk management and internal control, and training, education, and awareness of best practices. This study may have a positive social impact in that a stable and profitable banking environment creates and sustains employment and results in an improvement in the individuals' standard of living.

Magister Legum - LLM (Public Law and Jurisprudence) / Zimbabwe is a Southern African country which has witnessed frequent bank collapses in the last two decades. This has eroded consumer and business confidence in the banking sector due to the irreparable financial prejudice suffered by most sectoral consumers. The side effect of this lack of trust in the sector has been the hoarding and preference of cash in most, if not all transactions, as opposed to the use of plastic money. Between April 2015 and March 2016, it is estimated that between US$3 billion and US$7.4 billion was circulating outside the banking system in the informal sector thus exposing the depth of mistrust crippling the banking sector. Together with other factors beyond the scope of this study, it is submitted that this lack of trust and confidence in the sector has contributed to the current cash shortage which, according to Latham and Cohen, has left .a black hole in the financial system that's crushing the rest of the economy'.

La crise financière globale de 2007-2009 a révélé la fragilité des banques modernes ainsi que les carences de la réglementation. A la suite de la crise, le secteur bancaire a connu des réformes réglementaires importantes : renforcement de la régulation micro-prudentielle, mise en place de dispositifs ayant des objectifs macroprudentiels et diverses initiatives de séparation des activités. Dans ce contexte, cette thèse, en s’appuyant sur les données américaines, essaie dans un premier temps d’expliquer la vulnérabilité des banques par leurs caractéristiques financières et leur structure organisationnelle. Ensuite, la thèse propose une analyse de l’efficacité de certains nouveaux outils dans le cadre des réformes. Nous trouvons les résultats suivants : 1) Le risque de faillite est plus élevé chez les banques qui adoptent des stratégies agressives pendant la période d’euphorie économique et qui se financent par des fonds instables. Une maison-mère saine (bien capitalisée et rentable) est une source de force des filiales bancaires. Cela vient étayer l’introduction du coussin de capital contracyclique et du ratio de liquidité dans Bâle III. 2) La diversification des activités contribue à la baisse du risque bancaire alors que les engagements croissants en activités non-traditionnelles volatiles semble rendre les banques plus vulnérables. Ceci conforte la nécessité d'une réforme structurelle pour certaines banques universelles. 3) Les ratios de levier prévoient mieux la probabilité de faillite des grandes banques que le ratio pondéré par les risques, tandis que les deux types de ratios sont aussi efficaces pour prévoir la faillite des petites banques. Ce résultat souligne l’importance du renforcement de la réglementation des banques systémiques et implique sa mise en œuvre. / The 2007-2009 global financial crisis reveals the fragility of modern banking sector and the flaws in bank regulation. In the wake of the crisis, an important number of reforms are carried out: enhancement of micro-prudential regulation, introduction of macro-prudential instruments and separation of activities. In this context, this thesis, using detailed information on the U.S. banking sector, tries to explain bank vulnerability by their financial characteristics and organizational structure. Then the thesis analyzes the efficiency of some new regulatory instruments. Our findings are the following: 1) Banks adopting an aggressive business model in economic boom and banks funded massively with instable liabilities are more likely to fail. A healthy (well-capitalized and profitable) bank holding company is a source of strength for its bank subsidiaries. These findings support the introduction of the countercyclical capital buffer and of the requirements on liquidity in the Basel III framework. 2) A high degree of diversification across different banking activities is associated with important risk reduction benefits while the expansion in non-traditional activities seems to make banks more vulnerable. This indicates the necessity of structural reform for certain universal banks. 3) The leverage ratios are more efficient in predicting failures of large banks than the risk-weighted capital ratio whereas the two types of capital ratios predict the failures of small banks as well as each other. These findings go in line with the reinforcement of regulation on systemically important banks.