Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/246966 
Year of Publication: 
2013
Series/Report no.: 
EHES Working Papers in Economic History No. 35
Publisher: 
European Historical Economics Society (EHES), s.l.
Abstract: 
Why do some banks fail in financial crises while others survive? This paper answers this question by analysing the consequences of the Dutch financial crisis of the 1920s for 143 banks, of which 37 failed. Banks' choices in balance sheet composition, corporate governance practices and shareholder liability regimes were found to have a significant impact on their chances of experiencing distress. Banks bore a higher probability of failing if, on the eve of the crisis, they: were highly performing; were highly leveraged; had fewer interlocking directorates with non-banks; and concentrated their managerial interlocks with highly profitable banks. Banks which chose to adopt shareholder liability regimes with unpaid capital were more likely to experience distress, but could mitigate this risk by keeping higher portions of their equity unpaid. Receiver operating characteristic analysis shows that interlock characteristics in particular have a high predictive power.
Subjects: 
financial crises
bank failures
interlocking directorates
shareholder liability
the Netherlands
the interwar period
JEL: 
G01
G21
G33
G34
N24
Document Type: 
Working Paper

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