Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/130630
Authors: 
Adrian, Tobias
Boyarchenko, Nina
Shin, Hyun-Song
Year of Publication: 
2015
Series/Report no.: 
Staff Report, Federal Reserve Bank of New York 743
Abstract: 
This paper studies the question of the economic scale of financial institutions. We show that banks actively smooth book equity by adjusting payouts to achieve a desired trajectory of book equity. The countercyclical nature of net payouts of financial institutions leads to procyclical book leverage, while market leverage is nearly entirely reflective of movements in book-tomarket ratios. There is an apparent structural break after the 2008 crisis, indicated by the banking sector's subdued growth rate relative to pre-crisis levels. Market volatility dampens the intermediary leverage cycle. We draw conclusions for theories of financial intermediation and for capital regulation.
Subjects: 
financial intermediation
market volatility
macro-finance
JEL: 
E02
E32
G00
G28
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.