by curbing risk-taking incentives, the higher the leverage the bank is permitted to take on. Consequently, the risk …

performance levels. The capital structure of Austrian SMEs are biased towards debt-financing and stronger equity, growth and …

it reflects special liquidity benefits of bank debt. Even aside from neglecting the systemic damage to the economy that …

because it reflects special liquidity benefits of bank debt. Even aside from neglecting the systemic damage to the economy …

model" problem, and policy answers such as leverage ratios and more reliance on backtesting mechanisms …

.e. finding the right balance between equity financing and debt. Taggert (1981) shows that rate-of-return regulation creates an …) find that the firm chooses its equity and debt in order to affect the outcome of the regulatory process. As a hybrid model … where bankruptcy is merely a threat, it may be optimal to rely on extreme strategies solely financing with equity or debt. …

We develop a model of the joint capital structure decisions of banks and their borrowers. Strikingly high bank leverage … take on high leverage safely; supply chain effects compel them to do so. Firms with low leverage also arise naturally, as … framework underlie our model, we can quantify the impact capital regulation and other government interventions have on leverage …

result of debt overhang, shareholders have incentives to resist reductions in leverage that make the remaining debt safer … combined value of the firm to shareholders and creditors. Moreover, debt overhang creates an "addiction" to leverage through a …We analyze shareholders' incentives to change the leverage of a firm that has already borrowed substantially. As a …

debt in place, shareholders pervasively resist leverage reductions no matter how much such reductions may enhance firm … value. Shareholders would instead choose to increase leverage even if the new debt is junior and would reduce firm value …. These asymmetric forces in leverage adjustments, which we call the leverage ratchet effect, cause equilibrium leverage …