An efficient and functional model for predicting bank distress: In and out of sample evidence

Our results demonstrate that our model can also easily be applied to a large number of firms (even those that don't fail) and does an excellent job of distinguishing healthy from distressed banks. Combining this effectiveness with its ease of implementation makes it very functional. Such a model should be of obvious interest to regulators, analysts, and all those with a direct interest in assessing bank financial health.