The Determinants of Bank Capital Structure
The paper shows that mispriced deposit insurance and capital regulation were of second-order importance in determining the capital structure of large U.S. and European banks during 1991 to 2004. Instead, standard cross-sectional determinants of non-financial firms' leverage carry over to banks, except for banks whose capital ratio is close to the regulatory minimum. Consistent with a reduced role of deposit insurance, we document a shift in banks' liability structure away from deposits towards non-deposit liabilities. We find that unobserved time-invariant bank fixed-effects are ultimately the most important determinant of banks' capital structures and that banks' leverage converges to bank specific, time-invariant targets. Copyright 2010, Oxford University Press.
Year of publication: |
2010
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Authors: | Gropp, Reint ; Heider, Florian |
Published in: |
Review of Finance. - European Finance Association - EFA, ISSN 1572-3097. - Vol. 14.2010, 4, p. 587-622
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Publisher: |
European Finance Association - EFA |
Saved in:
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