Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/77415
Authors: 
Trani, Tommaso
Year of Publication: 
2012
Series/Report no.: 
Graduate Institute of International and Development Studies Working Paper 14/2012
Abstract: 
This paper develops a macroeconomic framework where the representative bank is owned by inside and outside owners and copes with capital requirements that vary countercyclically. The issuance of outside equity is characterized getting insights from the literature on corporate governance, especially that on corporate governance and investor protection. The insider receives utility benefits from the diversion of dividends, but the costs of diversion increase with the size of bank equity owned by outsiders. The goal is to see to what extent the willingness of insiders to share the bank with outsiders is affected by capital regulation. I find a negative link, which holds only if capital restrictions vary countercyclically. Thinking of a positive shock, the justification for such a negative link is that the shock leads not only to tighter regulation, but also to higher expected dividends and, relatedly, to higher agency costs affecting the distribution of earnings.
Subjects: 
macroprudential policy
bank regulation
insider-outsider
bank shareholding
JEL: 
E60
G28
G32
Document Type: 
Working Paper

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