Predictors of Bank Distress: the 1907 Crisis in Sweden
Year: 2020
Type: preprint
Abstract: This paper studies the Swedish experience of the international crisis of 1907, which is often compared with the crisis of 2008. By constructing a new dataset from previously unanalyzed monthly bank-level data, we document high-frequency changes in bank outcomes throughout the 1907 crisis. While distressed banks suffered substantial withdrawals of foreign funds and liquid domestic liabilities, we show that banks' asset structures, along with observable fundamentals and institutional characteristics, played a more significant role in their subsequent fate. Higher shares of non-performing assets and lending against equities were the most important balance sheet predictors of distress. These balance sheet fundamentals, as well as over-extended branch networks, significantly shortened the lifespan of Swedish banks in the aftermath of the 1907 crisis.
DOI: 10.3886/e124441
Authors: Anna Grodecka-Messi, Seán Kenny, Anders Ögren
Institution: Lund University
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3121275976