Department of Economics

This reports studies what contributes to bank failure during the Great Recession and after the

introduction of the Dodd-Frank Act using survival analysis. I show that measures of CAMELS

ratings such as capital adequacy and solvency play large roles. I found that while a high

efficiency ratio increases risk of failure for financial institutions, banks can mitigate this by

focusing the burden of non-interest expenses on salary. While small banks (defined as having

below one billion dollars in assets) had an overall lower failure risk, they also had higher relative

risks of failure if they were inefficient than risks for large banks. However, small banks are

shown to reap the rewards of a high salary ratio more than large banks. Salary ratio influenced

post-Dodd-Frank bank failure more than it did pre-Dodd-Frank.