Bank Capital Requirements and Capital Structure
AbstractThis paper studies the impact of capital requirements, deposit insurance and tax benefits on a bank's capital structure. We find that properly regulated banks voluntarily choose to maintain capital in excess of the minimum required. Central to this decision is both tax advantaged debt (a source of firm franchise value) and the ability of regulators to place banks in receivership stripping equity holders of firm value. These features of our model help explain both the capital structure of the large mortgage Government Sponsored Enterprises and the recent increase in risk taking through leverage by financial institutions.
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Bibliographic InfoPaper provided by University of Connecticut, Department of Economics in its series Working papers with number 2009-09.
Length: 41 pages
Date of creation: Feb 2009
Date of revision:
Contact details of provider:
Postal: University of Connecticut 341 Mansfield Road, Unit 1063 Storrs, CT 06269-1063
Phone: (860) 486-4889
Fax: (860) 486-4463
Web page: http://www.econ.uconn.edu/
More information through EDIRC
Banks; Capital Structure; Capital Regulation; Financial Intermediation; Leverage; GSE; Investment Banks;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
- M48 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Government Policy and Regulation
This paper has been announced in the following NEP Reports:
- NEP-ACC-2009-03-22 (Accounting & Auditing)
- NEP-ALL-2009-03-22 (All new papers)
- NEP-BAN-2009-03-22 (Banking)
- NEP-BEC-2009-03-22 (Business Economics)
- NEP-CFN-2009-03-22 (Corporate Finance)
- NEP-REG-2009-03-22 (Regulation)
- NEP-RMG-2009-03-22 (Risk Management)
- NEP-URE-2009-03-22 (Urban & Real Estate Economics)
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