TY - JOUR
T1 - Predictors of Bank Distress
T2 - The 1907 Crisis in Sweden
AU - Grodecka-Messi, Anna
AU - Kenny, Seán
AU - Ögren, Anders
PY - 2021
Y1 - 2021
N2 - 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.
AB - 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.
KW - Bank Distress
KW - Financial Crises
KW - Swedish Banks
KW - Lender of Last Resort
KW - Bank Run
KW - Distress Predictors
U2 - 10.1016/j.eeh.2020.101380
DO - 10.1016/j.eeh.2020.101380
M3 - Article
SN - 0014-4983
VL - 80
JO - Explorations in Economic History
JF - Explorations in Economic History
M1 - 101380
ER -