Date of Award
Doctor of Business Administration (DBA)
Stress testing uses objective data to support various risk assessments of conditions within a bank's loan portfolio. Risk assessments include an analysis of both credit losses and capital adequacy, in addition to other related risk assessments. The purpose of this mixed method research study is to develop an understanding of stress testing of commercial real estate loan assets of community banks and of bank balance sheets. This understanding includes the impact of stress testing on both community bank financial performance and capital ratios, which is the quantitative component of this study with related hypotheses using multiple quantitative methods. The qualitative component of this study includes interviews of bank executives with questions about reasons for voluntary stress testing and the allocation of bank resources to stress testing when it is not required by regulatory statutes. Quantitative analyses findings concluded that banks that conduct voluntary stress testing do not have stronger financial performance and capital ratios and the null hypotheses were accepted. Qualitative analyses findings concluded that stress testing is a best practice and can be used for many purposes. Also, banks interviewed agree that stress testing is encouraged by the regulators despite not being required.
Carvalho, Kristin, "COMMUNITY BANK STRESS TESTING: WHY BANKS STRESS TEST AND THE IMPACT OF STRESS TESTING ON BANK CAPITAL AND PROFITABILITY" (2023). Open Access Dissertations. Paper 1575.