This paper examines how banks respond to a negative capital shock by using provisions for misconduct costs as an instrument. Our identification strategy exploits an important difference in timing between current lending behavior and past misconduct that current misconduct provisions refer to. We...

“Zombie lending” occurs when a lender supports an otherwise insolvent borrower. Recent studies document that zombie lending to European firms has been widespread following the onset of the European sovereign debt crisis. This paper develops a quantitative model to study the impact of these...

'Zombie lending' occurs when a lender supports an otherwise insolvent borrower. Recent studies document that zombie lending to European firms has been widespread following the onset of the European sovereign debt crisis. This paper develops a quantitative model to study the impact of these...

This paper shows that relaxing borrowing constraints positively affects household consumption in addition to stimulating housing market activity. We focus on the UK Help-to-Buy (HTB) program, which provided a sudden relaxation of the down payment constraint by facilitating home purchases with...

Over the last decade, banks around the world have been confronted with substantialmisconduct costs. We employ provisions for misconduct costs as an instrumentalvariable to identify the causal effect of a bank capital shock on risk-taking.Using new hand-collected data, we show that misconduct...

We examine whether “too‐big‐to‐fail” (TBTF) factors affect estimates of scale economies for large banks. From a standard model of bank production that does not control for any TBTF factors, we find evidence of scale economies for our sample of large banks. We then control for TBTF...