Empirical Analysis of Determinants of Geographic Differentials in the Bank Failure Rate in the U.S.: A Heteroskedastic-Tobit Estimation

Using the heteroskedastic-TOBIT model to deal with both censored data and a heteroskedasticity problem, this study address determinants of interstate differentials in bank closing rates over the 1982-91 period. It is found that the bank closing rate in a state is an increasing function of the cost of deposits, the percentage of state employment derived from oil and natural gas extraction, and the existence of unit banking regulations, while being a decreasing function of housing price inflation in the state, the average percentage growth rate of the GSP in the state, and the percentage of banks in the state having federal charters. (JEL codes: G2, G20, G21)