A study of the impact of capital requirements on bank portfolio decisions, showing that the variance of earnings and the incentive to increase leverage are reduced with risk- and leverage-related deposit rates, and that the impact of increased capital requirements on portfolio behavior is...

Under depositor-preference laws, depositors' claims on the assets of failed depository institutions are senior to unsecured general-creditor claims. As a result, depositor preference changes the capital structure of banks and thrifts, thereby affecting the cost of capital for depositories....

Using an explicit model for subordinated debt that considers the possibility of FDIC forbearances, the authors show that forbearance 1) alters the required rate of return on subordinated debt while increasing its market value and 2) weakens the effectiveness of such debt as a source of market...

An analysis of the impact of depositor preference laws on the cost of debt capital for banks and on the value of FDIC deposit guarantees. The authors find that depositor preference laws increase the value of uninsured deposit claims and reduce the size of the FDIC subsidy, but will not affect...

This paper presents an empirical analysis of the determinants of the leverage ratios (the book value of liabilities divided by the total of the book value of liabilities' and the market value of equity) for 232 bank holding companies for December 1986, June 1987, and December 1987. Many...

The impacts of deposit insurance and forbearance on the costs and value of uninsured deposits and equity capital are shown under three regimes.

An examination of the impact of increased capital requirements on bank portfolio behavior, finding that although the variance of earnings and the incentive to increase leverage are reduced with risk- and leverage-related interest rates, the impact of increased capital requirements on portfolio...

This paper examines two proposals to correct the risk-taking incentives embedded in the current deposit insurance system and to provide protection to the deposit insurance fund. the first would require banks to issue subordinated debt, and the second would require bank stockholders to post...

An assessment of how banks adjust to increased capital requirements, illustrated by a model of a bank's choice of optimal leverage.