Lambrecht, Bart M. - 2019
We present a dynamic, continuous-time model in which risk averse inside equityholders set a bank's lending, payout, and … financing policies, and the exposure of bank assets to crashes. The effect of the prevailing insolvency resolution mechanism … (IRM) on the probability of insolvency, loss in default, and the net value created by the bank suggests no single IRM is a …