We study a modification of the Diamond and Dybvig (1983) model in which the bank may hold a liquid asset, some … depositors see sunspots that could lead them to run, and all depositors have incomplete information about the bank's ability to … survive a run. The incomplete information means that the bank is not automatically incentivized to always hold enough liquid …

Both investors and borrowers are concerned about liquidity. Investors desire liquidity because they are uncertain about … when they will want to eliminate their holding of a financial asset. Borrowers are concerned about liquidity because they … compensation for the illiquidity investors will be subject to. We argue that banks can resolve these liquidity problems that arise …

facing each individual bank. We find that regulatory-induced competition reduced liquidity creation. Consistent with some …Does an intensification of competition among banks increase or decrease liquidity creation? By integrating the dynamic … process of interstate bank deregulation that lowered barriers to competition across U.S. states over the 1980s and 1990s with …

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 … underlie our structural model, we can quantify the impact capital regulation and other government interventions have on bank …

We trace the origins of China's rapidly developing shadow banking sector to the adoption of stricter liquidity rules by … China and explain why these hypotheses cannot account for the origins of the system …

issuance of common stock was negative due to repurchases. We assume that, in the absence of capital requirements, a bank has an … optimal capital structure that depends on its business model. Capital requirements can impose constraints on bank decisions …. If a bank's optimal capital structure also meets regulatory capital requirements with a sufficient buffer, the bank is …

's prediction that small firms may be unable to access liquidity when large shocks arrive using data on drawdowns in the COVID … recession. Consistent with the theory, the increase in bank credit in 2020Q1 and 2020Q2 came almost entirely from drawdowns by … large firms on pre-committed lines of credit. Differences in demand for liquidity cannot fully explain the differences in …

Banks are unique among financial institutions because they are the cheapest source of liquidity in the economy. Banks … market substitutes for bank liabilities do not escape from the cost of reserves since their issuers lean on banks to provide … liquidity. Since the cost of reserves falls on all issuers of less liquid liabilities seeking access to payment services …

firms from bank liquidity shocks …In 2011, Colombia instituted a tax on repayment of bank loans, thereby increasing the cost of short-term bank credit … more than long-term credit. Firms responded by cutting their short-term loans for liquidity management purposes and …