Using firm-level data for approximately 1,000 bank and nonbank financial institutions in 22 countries over the past 15 …

endogenous bank fragility and slow recovery from crises. When banks' investment decisions are not contractible, depositors form … expectations about bank risk-taking and demand a return on deposits according to their risk. This creates strategic … of bank net worth, leading to a persistent drop in investment and output. I bring the model to bear on the European …

We provide a theoretical foundation for the claim that prolonged periods of easy monetary conditions increase bank risk … taking. The net effect of a monetary policy change on bank monitoring (an inverse measure of risk taking) depends on the … structures, a monetary easing leads to greater leverage and lower monitoring. However, if a bank''s capital structure is fixed …

This paper examines the role of bank capital in decision-making by bank holding companies (BHCs) in the United States …. Following Chami and Cosimano's (2001) call option approach to bank capital, BHCs optimally choose the amount of capital to … insure the bank against becoming capital constrained in the future. We provide empirical support for this model, and find …