We present a model of the propagation process of bank runs. A bank failure alone is not sufficient to trigger a panic. In accord with the empirical evidence, runs become contagious only during periods of macroeconomic instability. In addition, we make a clear distinction between illiquidity and insolvency as possible causes of bank failures. We also show that, despite the possibility of runs, t...

The aims of accounting standard setting is substantially different to those of bank regulation. Financial reporting follows as a general purpose to provide information to those outside the firm to support decision usefulness. In contrast to this prudential bank regulation seeks to decrease the frequency and cost of bank failures and to protect the financial system as a whole by limiting the fre...

Presented are new failure-prediction models for detecting a bank's troubled status up to two years prior to insolvency using publicly available data and a new category of explanatory variable to capture the elusive, yet crucial, element of institutional success: management quality. Quality is assessed using data envelopment analysis (DEA), which views a bank as transforming multiple inputs into...

The experiments described here explored how pilots want available maneuver authority information transmitted and how this information affects pilots before and after an aircraft failure. The aircraft dynamic variables relative to flight performance were narrowed to energy management variables. A survey was conducted to determine what these variables should be. Survey results indicated that bank...

Significant numbers of U.S. commercial bank failures in the late 1980s and early 1990s raise important questions about bank performance. We develop a failure-prediction model for Connecticut banks to examine events in 1991 and 1992. We adopt data envelopment analysis to derive measures of managerial efficiency. Our findings can be briefly stated. Managerial inefficiency does not provide signifi...

The potential impact of interconnected financial institutions on interbank financial systems is a financial stability concern for central banks and regulators. A number of algorithms/methods have been developed to extrapolate latent interbank risk exposures. However, most use highly stylized network models and reconstruction methods with global optimality lending allocation approaches such as m...

We examine whether stress-test disclosures distort banks’risk-taking decisions. We study a model in which a regulator may choose to rescue banks in the event of concurrent bank failures. Our analysis reveals a novel coordination role of stress-test disclosures. By disclosing stress tests, a regulator informs all banks of the failure likelihood of other banks, which facilitates bank’s coordinati...