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The Financial Capital Constraint and the Valuation of Commercial Banking Activity

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  • Hartwick, John M.

Abstract

Equity capital makes the value of liabilities equal the value of assets in a commercial banks balance sheet This fact makes valuation of banking activity straightforward The cost of shareholder riskbearing becomes a natural entry into the cost side of valueadded Expected losses from lending become an entry in valueadded and this leads to the concept of ex ante and ex post valueadded A model of a protmaximizing bank is set out and the role of homogeneity in the production functions turns out to be crucial in dening inputs and output The implicit price of deposit capital is analyzed including the question of whether deposits are a cheap source of funds to the bank

Suggested Citation

  • Hartwick, John M., 1996. "The Financial Capital Constraint and the Valuation of Commercial Banking Activity," Queen's Institute for Economic Research Discussion Papers 273374, Queen's University - Department of Economics.
    • Handle: RePEc:ags:queddp:273374
    DOI: 10.22004/ag.econ.273374
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    Cited by:

    1. Hartwick, John M., 1997. "On Imputing for Financial Services in the National Accounts Commercial Banking in General Equilibrium," Queen's Institute for Economic Research Discussion Papers 273380, Queen's University - Department of Economics.

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    Keywords

    Financial Economics; Public Economics;

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