A fundamental principle taught to all accounting and business students is that the goal of the firm is maximization of shareholder value (MSV). In order for accountants and auditors to provide firms with ethical recommendations that keep it strong and healthy, they must understand the negative...

Banks operating in a regulated environment need to operate within the fiscal, monetary, political and legal regulations; customer tastes, habits and demand; and input supply changes. Changes in these require adjustments in the bank’s operations. Coping with these require finance and instant...

This paper develops a model of banking to study the risk-taking consequences of contingent capital (CC). It begins with the observation that partial conversion of CC provides its owners with a portfolio of equity and debt. Since the former (latter) asset typically induces a preference for risk...

This study evaluates the impact of profit-sharing investment accounts (PSIAs) on shareholders’ wealth. Using probabilistic tools, we derive an explicit formula for PSIA value. We apply this formula to calculate account values for a sample of 52 banks in 13 countries and determine an empirical...

We examine the relation between capital and liquidity creation. This issue is interesting because of the potential impact on liquidity creation from tighter capital requirements such as those in Basel III. We perform Granger-causality tests in a dynamic GMM panel estimator framework on an...

In this paper, we investigate how the regulatory stress test framework in the European Union affects banks' investment decisions and portfolio choices. Using the causal inference and event study methodology, we document a substantial impact of EU-wide stress tests in 2011, 2014 and 2016 on the...

This paper investigates the impact of regulatory stress test framework in the European Union on the banks conduct and portfolio adjustments. Our findings suggest that the banks subject to regulatory stress testing tend to structure their portfolios with lower risk density. However this does not...