The Economic Capital Of Opaque Financial Institutions
AbstractThe capital structure of firms that cannot hedge continuously is affected by the agency costs and the moral-hazard implicit in the contracts they establish with stockholders and customers. It is demonstrated in this paper that then an optimal level of capital exists, which is characterised in terms of the actuarial prices of the involved agreements. The capital principle so obtained extends the classic theoretical framework, sustained by the well-known proposition of Modigliani and Miller and the model of deposit insurance of Robert Merton, at the time that naturally integrates the financial and actuarial theoretical settings.
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Bibliographic InfoArticle provided by Spiru Haret University, Faculty of Financial Management and Accounting Craiova in its journal Journal of Applied Economic Sciences.
Volume (Year): 3 (2008)
Issue (Month): 3(5)_Fall2008 ()
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Web page: http://www2.spiruharet.ro/facultati/facultate.php?id=14
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capital structure; economic capital; risk capital; deposit insurance; Value-at-Risk;
Find related papers by JEL classification:
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
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- Mierzejewski, Fernando, 2008. "The optimal liquidity principle with restricted borrowing," MPRA Paper 12549, University Library of Munich, Germany.
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