This paper analyzes the effect of the removal of government guarantees on bank risk taking. We exploit the removal of guarantees for German Landesbanken which results in lower credit ratings, higher funding costs, and a loss in franchise value. This removal was announced in 2001, but...

This paper analyzes the effect of the removal of government guarantees on bank risk taking. We exploit the removal of guarantees for German Landesbanken which results in lower credit ratings, higher funding costs, and a loss in franchise value. This removal was announced in 2001, but...

This paper develops a dynamic trade-off model of optimal capital structure that takes intoaccount the fact that most firms have both invested assets and growth opportunities. Thesetwo sources of value react quite differently to business cycle risk. In particular, growth optionsare more sensitive...

Analyzing a comprehensive database of limited liability manufacturing firms this paper investigates the relation between a firm’s financial situation and its conditional expected growth rate. Specifically, using quantile regressions, we obtain a quantitative characterization of this relation...