Bhattacharya, Sudipto; Plank, Manfred; Zechner, Josef; … - Financial Markets Group - 2000
We consider a model of optimal bank closure rules (cum capital replenishment by banks), with Poisson-distributed audits of the banks asset value by the regulator, with the goal of eliminating (ameliorating) the incentives of levered bank shareholder/mangers to take excessive risks in their...