perquisites that yield private benefits). The privately optimal level of bank leverage is neither too low nor too high: It … substitution induced at high levels of leverage. However, when correlated bank failures can impose significant social costs …, governments may have no option but to bail out bank creditors. Anticipation of this generates an equilibrium featuring systemic …

We develop a theory of optimal bank leverage in which the benefit of debt in inducing loan monitoring is balanced … against the benefit of equity in attenuating risk-shifting. However, faced with socially-costly correlated bank failures …

We develop a theory of optimal bank leverage in which the benefit of debt in inducing loan monitoring is balanced … against the benefit of equity in attenuating risk-shifting. However, faced with socially-costly correlated bank failures …

equity and towards deposits when creditor rights become stronger. These results suggest that bank equity, rather than … in bank leverage affect bank risk-taking. We find that increases in creditor rights increase bank risk-taking, but only …

The objective of this research is to examine the inter-bank network of clients as a channel for credit risk … banking network channel. There were different models of bank behaviour, from a group of banks that fully aligned their risk …