Capital requirements for banks must balance a number of factors, including any effects on the cost of capital and in … banks’ leverage would reduce the risk and cost of their equity but leave the overall weighted average cost of capital … unchanged. We test these two predictions empirically. We confirm that the equity of better-capitalized banks has both lower …

perfect and efficient capital markets, reducing banks' leverage reduces the risk and cost of equity but leaves the overall …-capitalized banks has lower systematic risk (beta) and lower idiosyncratic risk. However, over the last 40 years, lower risk banks have … other samples. The size of the low risk anomaly within banks suggests that the cost of capital effects of capital …

Traditional capital structure theory in frictionless and efficient markets predicts that reducing banks' leverage … borrowers). We test these two predictions. We confirm that the equity of better-capitalized banks has lower beta and … idiosyncratic risk. However, over the last 40 years, lower risk banks have higher stock returns on a risk-adjusted or even a raw …

macroeconomic risk, investors reduce direct investment and hold more bank deposits. This ‘flight to quality’ leaves banks flush with … liquidity. Inside banks, given lack of observability of effort, loan officers (or risk takers) are compensated based on the … volume of loans but are penalized if banks suffer a high enough liquidity shortfall. Outside banks, when there is heightened …

suggest that improving bank access to branching affects the sectoral specialization (or diversification) of output, in a …We document that the deregulation of bank branching restrictions in the United States triggered a reallocation across …