Antecedents of Failure in Recently Chartered Banks in the U.S. Banking Industry

In the United States, newly chartered banks are subject to increased regulatory scrutiny during their early years of operation to ensure their long-term viability. As the record number of bank failures in 2009 has shown, this additional regulation does not guarantee success. To better understand the internal factors in this environment that result in organizational distress, an antecedent failure state, the authors focus on the group-level characteristics of the banks’ founding teams, specifically ownership concentration and four explicit types of founding experience. Using a sample of 129 banks based in Florida, they find that increased ownership concentration, prior industry experience, heterogeneous occupational experience and joint prior founding experience and prior shared experience decreases organizational distress. Their results provide direction on characteristics that may help firms avoid organizational distress.