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Banks are the most important financial institutions in Turkey because other financial institutions are not developed efficiently yet. Turkish banks experienced financial difficulties and a substantial amount of banks failed in the past. This event urged the government to initiate measures to prevent banks from getting into financial difficulties. As a result of these measures, Turkish banking system currently seems to be very attractive for the foreign investors willing to invest in this sector. One of the main concerns of the foreign investors is a possibility of a new banking crisis although it is very remote at this time. The purpose of this study is to develop early warning systems predicting the financial failure at least three years ahead of financial failure date.

A number of multivariate statistical models such as multiple regression, discriminant analysis, logit, probit are used. We found that the most appropriate model is logit. The significant variables obtained from the models explain very well the causes of the bank failures. Our models can be used to assist interested parties to predict the probability of financial failure of Turkish banks.

Comments by the Federal Reserve Chairman often evoked concerns about whether the government would protect bondholders in the event of default by Fannie Mae and Freddie Mac (F&F). Using a model of capital structure, we analyze the impact of this uncertainty on the value of the implicit subsidy for F&F (and similar institutions). We show that, counter to intuition, an increase in the likelihood that the government will not subsidize these entities via a guarantee may increase the expected cost of the subsidy to the federal government. A cap on the value of the investment portfolio is a more effective mechanism to reduce the risk exposure of the federal government. We also assess the design and impact of proposed receivership rules and highlight the problems in regulating GSE portfolios. Even though F&F are now in conservatorship, the framework is applicable to other government sponsored entities where there is ambiguity about the extent of government backing.

After struggled for nearly 50 years, the city of Detroit filed for Chapter 9 bankruptcy on 18 July, 2013 and emerged from court protection on 10 December, 2014 brining to a close the largest municipal bankruptcy in American history after 17 months. In this research, we argue that the failure of Detroit is collectively attributed to the lack of a well-thought industry strategy. We structure a conceptual framework relating a city's industry mix to the population growth and its human capital stock. The stock of human capital is not only an outcome of the industry strategy but it feeds back to the industry portfolio. By using a time series data, we show a significant impact of the market share of the Detroit Three on the employment of the traditional industries in the Detroit area. The education attainment of the adult population in Detroit suggests a stagnant trend since 2005. Our empirical evidence jointly implies that an un-diversified industry portfolio of a city not only intensifies the correlation between its economic fate with the fluctuation of the focused industry but it also generates barriers to upgrade its work force and as a result, rebalancing its industry mix becomes difficult.