A.B. Freeman School of Business
7 McAlister Drive
New Orleans, LA 70118
NBER Working Papers and Publications
|March 2016||Why Does Fast Loan Growth Predict Poor Performance for Banks?|
with Rüdiger Fahlenbrach, René M. Stulz: w22089
From 1973 to 2014, the common stock of U.S. banks with loan growth in the top quartile of banks over a three-year period significantly underperforms the common stock of banks with loan growth in the bottom quartile over the next three years. The benchmark-adjusted cumulative difference in performance over three years exceeds twelve percentage points. The high growth banks also have significantly higher crash risk over the three-year period. This poor performance is explained by fast loan growth as asset growth separate from loan growth is not followed by poor performance. These banks reserve less for loan losses when their loans grow quickly than other banks. Subsequently, they have a lower return on assets and increase their loan loss reserves. The poorer performance of the fast growing b...
|May 2011||This Time Is the Same: Using Bank Performance in 1998 to Explain Bank Performance During the Recent Financial Crisis|
with Rüdiger Fahlenbrach, René M. Stulz: w17038
We investigate whether a bank's performance during the 1998 crisis, which was viewed at the time as the most dramatic crisis since the Great Depression, predicts its performance during the recent financial crisis. One hypothesis is that a bank that has an especially poor experience in a crisis learns and adapts, so that it performs better in the next crisis. Another hypothesis is that a bank's poor experience in a crisis is tied to aspects of its business model that are persistent, so that its past performance during one crisis forecasts poor performance during another crisis. We show that banks that performed worse during the 1998 crisis did so as well during the recent financial crisis. This effect is economically important. In particular, it is economically as important as the leverage ...
Published: RÃ¼diger Fahlenbrach & Robert Prilmeier & RenÃ© M. Stulz, 2012. "This Time Is the Same: Using Bank Performance in 1998 to Explain Bank Performance during the Recent Financial Crisis," Journal of Finance, American Finance Association, vol. 67(6), pages 2139-2185, December. citation courtesy of