The Use of Accounting Data to Predict Bank Financial Distress in MENA Countries

Isabelle Distinguin (1) , Iftekhar Hasan (2) , Amine Tarazi (1)

1 LAPE - Laboratoire d'Analyse et de Prospective Economique
2 Fordham University, 1790 Broadway, 11th Floor, New York, NY 10019, USA

Using an innovative approach of following the downgrade or credit rating decisions by rating agencies, this paper develops an early-warning system of bank financial distress and critically evaluates the reliability and stability of the potential indicators or factors of banks in 13 emerging economies in the MENA region. Evidence portrays that the capital, asset quality, earnings, and liquidity ratios are accurate accounting indicators to predict bank financial distress. However, we observe that influence of factors vary across size of the banks as accounting information does not appear reliable to predict bank financial distress of small banks. By contrast, the balance sheet structure of banks (both the asset side and liability side) does not affect the accuracy of accounting indicators.

Mots clés: Notleidende Kredite; Non-performing loans; Frühwarnsystem; Early warning system; Kreditwürdigkeit; Credit rating; Asymmetrische Information; Asymmetric information; Bankgeschäft; Banking; MENA-Staaten; MENA countries; 1997-2007

Domaines: Economies et finances

Isabelle Distinguin, Iftekhar Hasan, Amine Tarazi. The Use of Accounting Data to Predict Bank Financial Distress in MENA Countries. International Journal of Banking, Accounting and Finance, 2010, 2 (4), pp.332-356. ⟨hal-00785049⟩