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  1. Voluntary equity, project risk, and capital requirements
    Author: Haufler, Andreas; Lülfesmann, Christoph
    Published: January 2022
    Publisher:  CESifo, Center for Economic Studies & Ifo Institute, Munich, Germany

    We introduce a model of the banking sector that formally incorporate a buffer function of capital. Heterogeneous banks choose their portfolio risk, bank size, and capital holdings. Banks voluntarily hold equity when the buffer effect against the risk... more

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    Verlag (kostenfrei)
    Verlag (kostenfrei)
    Resolving-System (kostenfrei)

    Location:
    ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
    Signature:
    DS 63
    Inter-library loan:
    No inter-library loan

     

    We introduce a model of the banking sector that formally incorporate a buffer function of capital. Heterogeneous banks choose their portfolio risk, bank size, and capital holdings. Banks voluntarily hold equity when the buffer effect against the risk of default outweighs the cost advantages of debt financing. In the optimum, banks with lower monitoring costs are larger, choose riskier portfolios, and have less equity. Binding capital requirements or levies on bank borrowing are shown to make higher-risk portfolios more attractive. Accounting for banks’ interior capital choices can thus explain why higher capital ratios incentivize banks to undertake riskier projects.

     
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    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
    Other identifier:
    hdl: 10419/252022
    Series: CESifo working paper ; no. 9505 (2022)
    Subjects: voluntary equity; capital requirements; bank heterogeneity
    Scope: 1 Online-Ressource (circa 38 Seiten), Illustrationen
  2. Voluntary equity, project risk, and capital requirements
    Author: Haufler, Andreas; Lülfesmann, Christoph
    Published: [2022]
    Publisher:  Collaborative Research Center Transregio 190, [München]

    We introduce a model of the banking sector that formally incorporates a buffer function of capital. Heterogeneous banks choose their portfolio risk, bank size, and capital holdings. Banks voluntarily hold equity when the buffer effect against the... more

    Access:
    Verlag (kostenfrei)
    Resolving-System (kostenfrei)

    Location:
    ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
    Signature:
    DS 553
    Inter-library loan:
    No inter-library loan

     

    We introduce a model of the banking sector that formally incorporates a buffer function of capital. Heterogeneous banks choose their portfolio risk, bank size, and capital holdings. Banks voluntarily hold equity when the buffer effect against the risk of default outweighs the cost advantages of debt financing. In this setting, banks with lower monitoring costs are larger, choose riskier portfolios, and have less equity. Moreover, binding capital requirements or levies on bank borrowing are shown to make higher-risk portfolios more attractive. Accounting for banks' interior capital choices can thus explain why higher capital ratios incentivize banks to undertake riskier projects.

     
    Export to reference management software   RIS file
      BibTeX file
    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
    Other identifier:
    hdl: 10419/282049
    Edition: This version: December 2022
    Series: Discussion paper / Rationality & Competition, CRC TRR 190 ; no. 357 (December 27, 2022)
    Subjects: voluntary equity; capital requirements; bank heterogeneity
    Scope: 1 Online-Ressource (circa 40 Seiten), Illustrationen