Bank Failure Prediction

  • DE Amadasu

Abstract

Commercial bank failure or corporate failure prediction has been studied in advanced countries (Altman, 1968) and developing countries like Nigeria (Osaze, 1981). Both showed the ratio of retained earnings/total asset as most significant in a failing firm. These studies were carried out in the late sixties and early eighties, respectively .If they complied with the  recommendation for checkmating the failure incidence, why is there still rampant corporate failure as evidenced by the recent global financial melt-down and the current Nigerian banking crisis of failure? The issue or problem now is whether the same default ratio is prevalent in Nigerian banking failure using more current data 2003 to 2007 with four packages of analysis, i.e. multiple- discriminant analysis, ordinary least squares regression, correlation Matrix and Logit - Probit regression, for  sophistication and effectiveness. Instead of the „rule of the thumb. remarks on some earlier studies. The finding is that working capital/total asset (default ratio) among others should be closely taken care of and the major recommendation is that bank officials or corporate managers whose firms failed should not be with impunity.
Published
2014-08-13
Section
Articles

Journal Identifiers


eISSN: 2227-5452
print ISSN: 2225-8590