The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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This Time Is the Same: Using Bank Performance in 1998 to Explain Bank Performance during the Recent Financial Crisis
Published: 11/19/2012 | DOI: 10.1111/j.1540-6261.2012.01783.x
RÜDIGER FAHLENBRACH, ROBERT PRILMEIER, RENÉ M. STULZ
Are some banks prone to perform poorly during crises? If yes, why? In this paper, we show that a bank's stock return performance during the 1998 crisis predicts its stock return performance and probability of failure during the recent financial crisis. This effect is economically large. Our findings are consistent with persistence in a bank's risk culture and/or aspects of its business model that make its performance sensitive to crises. Banks that relied more on short‐term funding, had more leverage, and grew more are more likely to be banks that performed poorly in both crises.