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A Q-Theory of Banks / Juliane Begenau, Saki Bigio, Jeremy Majerovitz, Matias Vieyra.
- Format:
- Book
- Author/Creator:
- Begenau, Juliane.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w27935.
- NBER working paper series no. w27935
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2020.
- Summary:
- 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.
- Notes:
- Print version record
- October 2020.
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