TY - JOUR
T1 - Federal deposit insurance coverage and bank failures
T2 - A cointegration analysis with semi-annual data, 1965-91
AU - Saltz, Ira
PY - 1997/1/1
Y1 - 1997/1/1
N2 - This study examines empirically the link between bank failures and statutorially created increases in the extent of federal deposit insurance coverage. The model includes such factors as the percentage of deposits at federally insured banks that was covered by federal deposit insurance (FDICOV), the tangible capital/asset ratio, the commercial bank cost of funds, and the prime rate of interest. Using cointegration techniques involving maximum eigenvalue, trace, and likelihood ratio tests, together with semi-annual data for 1965-91. the study reveals that the bank failure rate is cointegrated with FDICOV, the capital/asset ratio. and the commercial bank cost of funds. Accordingly, it is inferred that-consistent with previous studies-the system of federal deposit insurance very likely induced bank failures during the study period.
AB - This study examines empirically the link between bank failures and statutorially created increases in the extent of federal deposit insurance coverage. The model includes such factors as the percentage of deposits at federally insured banks that was covered by federal deposit insurance (FDICOV), the tangible capital/asset ratio, the commercial bank cost of funds, and the prime rate of interest. Using cointegration techniques involving maximum eigenvalue, trace, and likelihood ratio tests, together with semi-annual data for 1965-91. the study reveals that the bank failure rate is cointegrated with FDICOV, the capital/asset ratio. and the commercial bank cost of funds. Accordingly, it is inferred that-consistent with previous studies-the system of federal deposit insurance very likely induced bank failures during the study period.
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U2 - 10.1007/BF02929033
DO - 10.1007/BF02929033
M3 - Article
AN - SCOPUS:77950043554
SN - 1055-0925
VL - 21
SP - 3
EP - 9
JO - Journal of Economics and Finance
JF - Journal of Economics and Finance
IS - 3
ER -