Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/97495
Authors: 
Colvin, Christopher L.
de Jong, Abe
Fliers, Philip T.
Year of Publication: 
2014
Series/Report no.: 
QUCEH Working Paper Series 14-04
Abstract: 
Why do some banks fail in financial crises while others survive? This article answers this question by analysing the effect of the Dutch financial crisis of the 1920s on 142 banks, of which 33 failed. We find that choices of balance sheet composition and product market strategy made in the lead-up to the crisis had a significant impact on banks' subsequent chances of experiencing distress. We document that high-risk banks - those operating highly-leveraged portfolios and attracting large quantities of deposits - were more likely to fail. Branching and international activities also increased banks´ default probabilities. We measure the effects of board interlocks, which have been characterized in the extant literature as contributing to the Dutch crisis. We find that boards mattered: failing banks had smaller boards, shared directors with smaller and very profitable banks and had a lower concentration of interlocking directorates in non-financial firms.
Subjects: 
financial crises
bank failures
bank business models
interlocking directorates
the Netherlands
the interwar period
JEL: 
G01
G21
G33
G34
N24
Document Type: 
Working Paper

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