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

underlying mechanisms differ. The tax shield incentivises debt financing as it reduces tax payments to the government. The …Systemically important banks are subject to at least two departures from the neutrality of debt versus equity financing …: the tax deductibility of interest payments and implicit funding subsidies. This paper fills a gap in the literature by …

or employment. Using U.S. firm level data, we document systematic patterns of cash and debt financing around lumpy … productivity are leading indicators of the lumpy adjustment. Cash and debt capacity are actively manipulated, and contribute … debt. During and after contractions, firms rebuild cash and reduce debt growth significantly in a concerted effort to …

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

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

perquisites that yield private benefits). The privately optimal level of bank leverage is neither too low nor too high: It … balances efficiently the market discipline imposed by owners of risky debt on managerial rent seeking against the asset … substitution induced at high levels of leverage. However, when correlated bank failures can impose significant social costs …

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 …

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 …

.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. …