The moral hazard incentives of the bank safety net predict that distressed banks take on more risk and higher leverage … include financial crises and are subject to different regulatory regimes (1985–1994, 2005–2014). We find that distressed banks …

We investigate whether a bank’s performance during the 1998 crisis, which was viewed at the time as the most dramatic …. Another hypothesis is that a bank’s poor experience in a crisis is tied to aspects of its business model that are persistent …, so that its past performance during one crisis forecasts poor performance during another crisis. We show that banks that …

We investigate why only some banks use regulatory arbitrage. We predict that banks wanting to be riskier than allowed … by capital regulations (constrained banks) use regulatory arbitrage while others do not. We find support for this … hypothesis using trust preferred securities (TPS) issuance, a form of regulatory arbitrage available to almost all U.S. banks …

From 1973 to 2014, the common stock of U.S. banks with loan growth in the top quartile of banks over a three …-year period significantly underperforms the common stock of banks with loan growth in the bottom quartile over the next three … high growth banks also have significantly higher crash risk over the three-year period. This poor performance is explained …

Liquidity production is a central function of banks. High leverage is optimal for banks in a model that has just enough … frictions for banks to have a meaningful role in liquid-claim production. The model has a market premium for (socially valuable … premium, banks with risky assets use risk management to maximize their capacity to include such debt in the capital structure …

We investigate whether the value of large banks, defined as banks with assets in excess of the Dodd-Frank threshold for …. Many argue that large banks receive subsidies from the regulatory safety net, so they should be worth more and their … valuation should increase with size. Instead, using a variety of approaches, we find (1) no evidence that large banks are valued …

risky banks, thereby creating market discipline. An alternative perspective is that market discipline is limited (e.g., due … to deposit insurance and/or enhanced capital regulation) and that internal demand for funding by banks determines rates … capitalization levels. In contrast, banks' loan growth has a causal effect on deposit rates: e.g., branches' deposit rates are …