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Portfolio and financing adjustments for U.S.Banks: some empirical evidence

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Author Info
Krainer, R.
Abstract

This paper presents a model of the portfolio and financing adjustments of U.S. banks over the business cycle. At the core of the model is a moral hazard problem between depositors/bank regulators and stockholders. The solution to this problem takes the form of shared management of the bank. Stockholders manage the bank's portfolio and the regulator manages the financing of the portfolio. The model predicts that portfolio adjustments are made to conform to the risk aversion of shareholders and financing adjustments are made to offset changes in portfolio risk. Regression evidence for 1955-2000 fails to reject these predictions.

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File URL: http://www.banque-france.fr/gb/publications/telechar/ner/ner217.pdf
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Publisher Info
Paper provided by Banque de France in its series Documents de Travail with number 217.

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Length: 44 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:bfr:banfra:217

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Postal: Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS
Web page: http://www.banque-france.fr/
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Related research
Keywords: Banks; Business Cycles ; Basle Accord; Finance;

Find related papers by JEL classification:
E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
G2 - Financial Economics - - Financial Institutions and Services
L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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This page was last updated on 2009-12-2.

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