We develop a dynamic model of banking to assess the effects of liquidity and leverage requirements on banks' insolvency risk. In this model, banks face taxation, flotation costs of securities, and default costs and maximize shareholder value by making their financing, liquid asset holdings, and...

While small- and medium sized firms in Austria are generally more productive, export more, and engage more in higher technology activities than in comparable countries, they need to adapt better to the knowledge economy to maintain their relative performance levels. The capital structure of...

Existing literature has not yet defined a clear-cut relationship between ownership structure and capital structure. This study aims to contribute to this controversial argument by examining the impact of internal (managerial) ownership and external ownership on financing preferences using the...

This paper surveys the literature on payout policy. We start out by discussing several stylized facts that are important to the development of any comprehensive payout policy framework. We then describe the Miller and Modigliani (1961) payout irrelevance proposition, and consider the effect of...

We argue that the prospect of an imperfect enforcement of debt contracts in default reduces shareholder-debtholder conflicts and induces leveraged firms to invest more and take on less risk as they approach financial distress. To test these predictions, we use a large panel of firms in 41...

We develop a model of the joint capital structure decisions of banks and their borrowers. Strikingly high bank leverage emerges naturally from the interplay between two sets of forces. First, seniority and diversification reduce bank asset volatility by an order of magnitude relative to that of...

Firms' inability to commit to future funding choices has profound consequences for capital structure dynamics. With debt in place, shareholders pervasively resist leverage reductions no matter how much such reductions may enhance firm value. Shareholders would instead choose to increase leverage...