The fatter the tail, the shorter the sail

Saad Alsunbul, Basim Alzugaiby, Sajid Chaudhry, Rhada Boujlil

Research output: Contribution to journalArticlepeer-review


Guided by the extreme value theory, this study empirically investigates the impact of tail risk measures on financial distress of publicly traded bank holding companies (BHCs) in the United States. Our results show that tail risk measures namely, value-at-risk and expected shortfall, are significantly and positively related to banks distress risk. Implying that BHCs with more frequent extreme negative daily equity returns induce higher tail risks, thereby increasing their likelihood of experiencing financial distress. Our results also show that tail risk measures enhance the explanatory power of traditional models explaining banks distress risk based on accounting information. These results indicate that market discipline is generally beneficial in managing and regulating banks, bolstering claims of the importance of macro-prudential supervision of financial institutions.
Original languageEnglish
JournalAccounting and Finance
Early online date25 Jul 2023
Publication statusE-pub ahead of print - 25 Jul 2023

Bibliographical note

Publisher Copyright:
© 2023 Accounting and Finance Association of Australia and New Zealand.


  • bank
  • bank distress
  • expected shortfall
  • tail risk
  • value-at-risk


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