| Summary: | 碩士 === 國立中正大學 === 財務金融所 === 98 === For the single year of 2009, the number of insolvent banks reached 631, which was more than any year of previous crisis since Great Depression of 1930s for the US. Although risk taking of banks, especially in real estate loans, is gauged to be the cause for the 2008 financial crises in the US, it has not been empirically tested. Therefore, the purpose of this paper is to investigate whether the risk taking, especially in real estate loans, is the underlying reason for the bank failure and 2008 financial crisis.
The traditional risk taking process is complicated by the implementation of loan securitization. If the securitization process is complete and immediate, bank risk should be reduced and cannot be easily observed even when banks have high risk-taking operation. Risk can be observed only when the process of securitization is incomplete.
A comprehensive risk taking indicators, including eighteen loan ratios and forty-five indicators for asset quality which never used before, are created to represent the risk-taking behavior of commercial banks. We included not only failed banks, but also bailout banks as extended problem banks. The logit model, multinomial logit model, and split-population model are used in this paper.
The empirical results of this paper show that both asset quality indicators and loan ratio indicators of total loans generate significant impacts on the probability of bank failure. The results further show risk taking in real estate loans, not in other types of loans, is significant for the likelihood of bank failure. So the results in this paper do disclose that risk taking, especially in real estate loans, is the cause of bank failure and 2008 banking crisis.
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