Wealth Distribution and Probability of Bank Failure across Countries

Abstract An L-Shape distribution of wealth may be viewed as undesirable since a small percentage of the population holds most of the wealth. In this study, we estimated the Burr-XII wealth distribution parameters for 175 countries over the years 2013–2018. We conducted a simulation that shows that L-shape wealth distribution is associated with a lower probability of bank failure than that of a unimodal-shape distribution in different countries. Our study implies that an L-shape of wealth distribution is related to the stability of banks. Therefore, in future empirical studies, it is essential to include the shape of wealth distribution, amongst other factors, in explaining the different bank failure rates across countries.