deposits towards non-deposit liabilities. We find that unobserved time-invariant bank fixed effects are ultimately the most … important determinant of banks’ capital structures and that banks’ leverage converges to bank specific, time invariant targets. …

analysis is relevant to the debate on bank capital regulation, and complements Admati et al. (2010). In that paper we argued …, the effects of leverage reduction on bank managers or shareholders do not represent a social cost. In fact, we show that … to leverage reduction leads to social inefficiencies. The main beneficiaries from high leverage may be bank managers. The …

behavior and risk sensitivity of a risk-neutral bank. The bank is exposed to credit risk and may use credit default swaps (CDS …) for hedging purposes. Regulation is found to induce the risk-neutral bank to behave in a more risk-sensitive way: Compared …. Under the Substitution Approach in Basel II (and III) a risk-neutral bank will over-, fully or under-hedge its total …

In this paper we review the actual operational data of an anonymous Central European Bank, using two approaches …

banking. Using cross-sectional data on publicly traded, highest-level U.S. bank holding companies, we find empirical evidence …

bank. The results suggest that capital requirements may only be of second-order importance for banks? capital structures …

We address two questions: (i) Are bank capital structure and value correlated in the cross section, and if so, how? (ii …) If bank capital does affect bank value, how are the components of bank value affected by capital? We first develop a … dynamic model with a dissipative cost of bank capital that is traded off against the benefits of capital: strengthened …