Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/248901 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 9356
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We propose a dynamic bank theory with a delayed loss recognition mechanism and a regulatory capital constraint at its core. The estimated model matches four facts about banks’ Tobin’s Q that summarize bank leverage dynamics. (1) Book and market equity values diverge, especially during crises; (2) Tobin’s Q predicts future bank profitability; (3) neither book nor market leverage constraints are binding for most banks; (4) bank leverage and Tobin’s Q are mean reverting but highly persistent. We examine a counterfactual experiment where different accounting rules produce a novel policy tradeoff.
Subjects: 
banks
leverage dynamics
market vs. book values
delayed accounting
JEL: 
G21
G32
G33
E44
Document Type: 
Working Paper
Appears in Collections:

Files in This Item:
File
Size





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