Despite operating under substantial regulatory constraints, we find that commercial banks manage their investments largely consistent with the predictions of portfolio choice models with capital market imperfections. Based on 1990-2002 data for small (assets less than $1 billion) U.S. commercial...

U.S. banks hold significantly more equity capital than required by their regulators. We test competing hypotheses regarding the reasons for this ldquo;excessrdquo; capital, using an innovative partial adjustment approach that allows estimated BHC-specific capital targets and adjustment speeds to...

We derive five hypotheses regarding market competition, price, and advertising from a theoretical model of a profit maximizing depository institution, and test these conjectures in a simultaneous system of deposit interest rates and advertising expenditures for a data panel of 1,867 thrift...