James W. Wansley

An application of the cox proportional hazards model to bank failure

The purpose of this study is to present the Cox proportional hazards model and to apply this model to the prediction of bank failures. The Cox model, which has been used extensively in biomedical applications, has not been previously employed in the finance literature. The principal advantage of the Cox model over other classification techniques is that it models the expected time to failure. Results of the study indicate that total classification accuracy of the Cox model is similar to that of discriminant analysis, although the Cox model produces somewhat lower type I errors. In a comparison of actual and predicted times to failure, the Cox model tends to identify bankruptcies prior to the actual failure date.

Managements' View on Share Repurchase and Tender Offer Premiums

N Once of interest only in times of relatively low market prices, share repurchases have become significant even during periods of rising markets. A Wall Street Journal article (September 18, 1987, p. 15) reported that

Determinants of Bank Growth Choice

25 billion of buybacks had been announced in the first seven months of 1987, compared to

Abnormal Returns from Merger Profiles

21 billion in the same period of 1986 and

An examination of misclassifications with bank failure prediction models

120 billion since January 1985. Announcements of repurchases skyrocketed with the October 1987 market crash, estimated at

Abnormal Returns to Acquired Firms by Type of Acquisition and Method of Payment

44 billion in the 10 days after the crash (Wall Street Journal, January 27, 1988, p. 21). The motivations behind repurchases remain unclear. Most studies are confined to indirect evidence ob-

GAINS TO BIDDER FIRMS IN CASH AND SECURITIES TRANSACTIONS

Abstract We study the determinants of bank growth in a two-stage logistic regression model. We first compare banks that branch, Bank Acquire, or Product Expand with banks that do not grow externally. Banks that are federally chartered, in states with higher income growth, and with higher labor prices are less likely to grow externally. Larger banks are more likely to grow externally. In the second stage, we study determinants of growth activity for banks that expand products, branch, or acquire other banks. Depending on the time period, bank structure, regulatory environment, performance, and balance sheet characteristics determine bank growth choices.

THE IMPACT OF CREDITWATCH PLACEMENT ON EQUITY RETURNS AND BOND PRICES

Several studies indicate the presence of large abnormal returns accruing to shareholders of merged firms in the period immediately before the merger. For example, Mandelker [18] reports that stockholders of acquired firms earn abnormal returns of approximately 14 percent in the seven months preceding merger. Franks, Broyles, and Hecht [15] find abnormal returns of 26 percent for British firms during the four months prior to merger; Elgers and Clark [11] report 43 percent abnormal returns accruing over two years before merger to shareholders of acquired firms.

INSTITUTIONAL BOND PRICING AND INFORMATION ARRIVAL: THE CASE OF BOND RATING CHANGES

Abstract Unlike prior work in the area of bank failure prediction, this article focuses on misclassifications: the individual banks that were predicted by a model to fail and yet have not, and those predicted to survive and yet have failed. The concern here is with the profile of these misclassified banks and the causes of their success or failure. Linear and quadratic multiple discriminant analysis models and Cox proportional hazards models are employed. The performance of these models is examined in periods subsequent to that over which they were estimated. The results provide insights for the development and application of early warning models for banks.