We study whether board structure (board size, independence and gender diversity) in banks relates to performance. Using a broad panel of large US bank holding companies over the period 1997–2011, we find that both board size and independent directors decrease bank performance. Although gender...

This paper sets out the criteria that boards and supervisors should use to determine whether banks are governing risk correctly. First, boards have to set an overall risk target consistent with the overall return target. Second, the bank’s business model has to set a risk capacity and risk...

Abstract Ruling out default prior to conversion of high-trigger (going-concern) CoCos, this paper concentrates on estimating the conversion risk premium on CoCos. It does so by estimating the cost of hedging that risk with a contingent put option, exercisable only in the event of conversion,...

We examine the pervasive view that “equity is expensive,” which leads to claims that high capital requirements are costly for society and would affect credit markets adversely. We find that arguments made to support this view are fallacious, irrelevant to the policy debate by confusing...

We develop a model of the joint capital structure decisions of banks and their borrowers. Strikingly high bank leverage emerges naturally from the interplay between two sets of forces. First, seniority and diversification reduce bank asset volatility by an order of magnitude relative to that of...

Numerous studies have focused on foreign ownership of banks, but instead of linkages to financial stability, they typically analyzed other issues and used country-level data. This article fills the gap in the literature by applying the GMM techniques on dynamic panels using bank-level data for...

In the paper we analyze the reasons of Russian bank license withdrawal, formulated in orders of CB RF at the period 2005.2–2008.4. During this period, after establishing deposit insurance system in Russia, two main reasons were «money laundering» and «financial insolvency». We design...

We investigate the rationale and impact of the corporate debt subsidization program implemented by the Russian government during the recent financial crisis. Employing the difference-in-difference approach, we show that the program did not have a significant impact on capital investments of...

We modify Adrian and Brunnermeier’s (2011) CoVaR, the VaR of the financial system conditional on an institution being in financial distress. We change the definition of financial distress from an institution being exactly at its VaR to being at most at its VaR. This change allows us to...

In spite of mounting losses banks continued to pay dividends during the crisis. We present a model that addresses this behavior. By paying out dividends, a bank transfers value to its shareholders away from creditors, among whom are other banks. This way, one bank's dividend payout policy...