Capital

Working Paper

Caught between Scylla and Charybdis? Regulating Bank Leverage When There is Rent Seeking and Risk Shifting

We develop a theory of optimal bank leverage in which the benefit of debt in inducing
loan monitoring is balanced against the benefit of equity in attenuating risk-shifting.
However, faced with socially-costly correlated bank failures...Read more

Viral Acharya
Anjan Thakor
01 September 2015

Pages