This study explores whether and how bank characteristics affect general risk-taking and tail risk of Too-Big-to-Fail (TBTF) and non-TBTF banks differently. We show that TBTF banks’ investment decisions drive their risks, while sources of funding drive risks of other banks. Contradicting the...

Financial reform must not ignore the interests of small stakeholders – who must be regarded as too small to be counted. Making equity an explicit objective is delicate: it needs to be calibrated such that the vulnerable are not exposed to further risks. Policies outside the realm of financial...

Does limiting the size of a large bank reduce its insolvency risk? This paper shows that the answer to this question depends on how exactly paring down of the bank size is done. In fact, the insolvency risk may go down or up depending on the composition of assets and liabilities of the bank...

The Global Financial Crisis of 2007-2009 put the spotlight on the problem of too-big-to-fail (TBTF). The research conducted in this context has, however, generally focused on the econometric aspect and the contribution of the TBTF doctrine to the financial crisis of 2007-2009, while the economic...

We examine sources of systemic risk (threshold size, complexity, and interconnectedness) with factors constructed from equity returns of large financial firms, after accounting for standard risk factors. From the factor loadings and factor returns, we estimate the implicit government subsidy for...

This paper investigates how conventional monetary policy shocks influence corporate financing decisions. We find that low-risk firms (i.e., firms with low debt burdens) respond more positively in increasing leverage ratios when the Federal Open Market Committee cuts interest rates. These firms...

I provide more evidence on the behavior of small and large firms, employing the Flow of Funds data, the QFR data and other sources. The empirical test to examine behavior of small and large firms is conducted in two ways: (1) by different episodes, tight monetary policy episodes and business...

We examine the relationship between lax monetary policy, access to high-yield bond markets and productivity in the US between 2008 and 2016. Using monetary policy surprises, obtained from changes in interest rates futures in narrow windows around FOMC announcements, we isolate the increased...

In the wake of the global financial crisis that erupted in 2008, there has been extensive commentary and regulatory focus on the 'Too Big to Fail' issue. In this paper, we survey the proposed solutions and regulatory initiatives that have been undertaken. We conduct a longitudinal analysis of...

This paper studies how quantitative easing (QE) affects household welfare across the wealth distribution. I build a Heterogeneous Agent New Keynesian (HANK) model with household portfolio choice, wage and price rigidities, endogenous unemployment, frictional financial intermediation, an...