Early Warning of Banks Failure in Cambodia: Cox’s Proportional Hazard Model
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This study uses CAMEL rating method which consists of five variables with the Cox’s Proportional Hazard model to predict the probability of survivor or stability rate of banks in Cambodia. The result indicates that capital adequacy and liquidity of the banks are the two main indicators explained the stability or survivor rate of banks. The predicted result of the Kaplan Meier Survivor shows that the stability of banking system in Cambodia is high in the short-run, but the instability of the financial system might occur in the long-run since the banks survivor rate is rather low. The result of survey reveals that about one third of the compliance based bankers has ever learned about CAMEL and only a few banks employ some methods or techniques in predicting the stability or survivor rate of the bank, while the early warning system of bank failure for the whole banking system does not really exist yet.
Keywords: CAMEL, Cox’s Proportional Hazard, Kaplan Meier, Survey.
