Faculty Publications

Declining Cost Efficiency As A Signal Of Increasing Bank Vulnerability: An Entropy-Based Approach

Document Type

Article

Journal/Book/Conference Title

Applied Economics Letters

Volume

17

Issue

18

First Page

1769

Last Page

1781

Abstract

The mortgage crisis of 2007/08 has impacted the health of both small and large commercial banks in the financial services industry. The pressing question is how do regulators and bank monitors identify the warning signals of bank vulnerability and bank risk because of weakening credit and asset markets. Linking poor bank performance and efficiency, we employ an information theoretic approach to derive the cost efficiency scores and evaluate the effects of crisis signaling factors such as different types of loans on cost efficiency of the smallest and largest commercial banks. © 2010 Taylor & Francis.

Department

Department of Finance

Original Publication Date

12-1-2010

DOI of published version

10.1080/13504850903357368

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