Why do banks disappear? The determinants of US bank failures and acquisitions

This paper seeks to identify the characteristics that make individual U.S. banks more likely to fail or be acquired. We use bank-specific information to estimate competing-risks hazard models with time-varying covariates. We use alternative measures of productive efficiency to proxy management quali ty, and find that inefficiency increases the risk of failure while reducing the probability of a bank's being acquired. Finally, we show that the clos er to insolvency a bank is (as reflected by a low equity-to-assets ratio) t he more likely is its acquisition.