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Bank insolvency risk and time-varying Z-score measures

Author

Listed:
  • Laetitia Lepetit

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

  • Frank Strobel

    (University of Birmingham [Birmingham])

Abstract

We compare the di¤erent existing approaches to the construction of time-varying Z-score measures, plus an additional alternative one, using a panel of banks for the G20 group of countries covering the period 1992–2009. We examine which ways of estimating the moments used in these di¤erent ap-proaches best …t the data, using a simple root mean squared error criterion. Our results are supportive of our alternative time-varying Z-score measure: it uses mean and standard deviation estimates of the return on assets cal-culated over full samples combined with current values of the capital-asset ratio, and is thus straightforward to implement.

Suggested Citation

  • Laetitia Lepetit & Frank Strobel, 2013. "Bank insolvency risk and time-varying Z-score measures," Post-Print hal-01098721, HAL.
    • Handle: RePEc:hal:journl:hal-01098721
    DOI: 10.1016/j.intfin.2013.01.004
    Note: View the original document on HAL open archive server: https://hal.science/hal-01098721
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    References listed on IDEAS

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    More about this item

    Keywords

    insolvency risk; Z-score; time-varying; mean squared error;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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