Bank Profitability Leverage Constraints and Risk taking

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Bank Profitability Leverage Constraints and Risk taking

Author	: Natalya Martynova
File Size	: 47,9 Mb
Publisher	: Unknown
Language	: English
Release Date	: 16 June 2024
ISBN	: 3957295963
Pages	: 0 pages

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Bank Profitability Leverage Constraints and Risk taking by Natalya Martynova Book PDF Summary

Traditional theory suggests that higher bank profitability (or franchise value) dissuades bank risk-taking. We highlight an opposite effect: higher profitability loosens bank borrowing constraints. This enables profitable banks to take risk on a larger scale, inducing risk-taking. This effect is more pronounced when bank leverage constraints are looser, or when new investments can be financed with senior funding (such as repos). The model's predictions are consistent with some notable cross-sectional patterns of bank risk-taking in the run-up to the 2008 crisis

Bank Profitability Leverage Constraints and Risk taking by Natalya Martynova,Lev Ratnovski,Razvan Vlahu

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Bank Profitability and Risk Taking by Natalya Martynova,Mr.Lev Ratnovski,Mr.Razvan Vlahu

Traditional theory suggests that more profitable banks should have lower risk-taking incentives. Then why did many profitable banks choose to invest in untested financial instruments before the crisis, realizing significant losses? We attempt to reconcile theory and evidence. In our setup, banks are endowed with a fixed core business. They

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Bank Profitability and Risk taking by Natalya Martynova,Lev Ratnovski,Razvan Vlahu

Download or read online Bank Profitability and Risk taking written by Natalya Martynova,Lev Ratnovski,Razvan Vlahu, published by Unknown which was released on 2015. Get Bank Profitability and Risk taking Books now! Available in PDF, ePub and Kindle.

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Monetary Policy Leverage and Bank Risk Taking by Mr.Luc Laeven,Mr.Giovanni Dell'Ariccia,Mr.Robert Marquez

We provide a theoretical foundation for the claim that prolonged periods of easy monetary conditions increase bank risk taking. The net effect of a monetary policy change on bank monitoring (an inverse measure of risk taking) depends on the balance of three forces: interest rate pass-through, risk shifting, and leverage.

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Bank Risk Taking and Competition Revisited by Mr.Gianni De Nicolo,John H. Boyd,Abu M. Jalal

This paper studies two new models in which banks face a non-trivial asset allocation decision. The first model (CVH) predicts a negative relationship between banks' risk of failure and concentration, indicating a trade-off between competition and stability. The second model (BDN) predicts a positive relationship, suggesting no such trade-off exists.

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Bank Leverage and Monetary Policy s Risk Taking Channel by Mr.Giovanni Dell'Ariccia,Mr.Luc Laeven,Mr.Gustavo Suarez

We present evidence of a risk-taking channel of monetary policy for the U.S. banking system. We use confidential data on the internal ratings of U.S. banks on loans to businesses over the period 1997 to 2011 from the Federal Reserve’s survey of terms of business lending. We find that

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Bank Profitability and Financial Stability by Ms.TengTeng Xu,Kun Hu,Mr.Udaibir S Das

We analyze how bank profitability impacts financial stability from both theoretical and empirical perspectives. We first develop a theoretical model of the relationship between bank profitability and financial stability by exploring the role of non-interest income and retail-oriented business models. We then conduct panel regression analysis to examine the empirical

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Monetary Policy Bank Leverage and Financial Stability by Mr.Fabian Valencia

This paper develops a model to assess how monetary policy rates affect bank risk-taking. In the model, a reduction in the risk-free rate increases lending profitability by reducing funding costs and increasing the surplus the monopolistic bank extracts from borrowers. Under limited liability, this increased profitability affects only upside returns,

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