Banks Adjust Slowly: Evidence and Lessons for Modeling

Juliane Begenau, Saki Bigio and Jeremy Majerovitz
Additional contact information
Juliane Begenau: Stanford GSB & NBER
Jeremy Majerovitz: MIT

Research Papers from Stanford University, Graduate School of Business

Abstract: We investigate the behavior of bank balance sheets in the United States during 2007-2015. The goal is to deepen the understanding of the behavior of banks. During this period, bank aggregate book-equity losses were entirely offset by equity issuances whereas market-value losses were catastrophic and never recovered. We find evidence that supports a theory where banks target market leverage, but where adjustments to a target are very gradual. We also find that, in contrast to the pre-crisis period, during the post-crisis banks relied more on retained earnings rather than on assets sales to adjust to a market leverage target. We present a heterogeneous-bank model that rationalizes these facts and can serve as a building block for future work.

Date: 2018-09
New Economics Papers: this item is included in nep-ban
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.gsb.stanford.edu/gsb-cmis/gsb-cmis-download-auth/461321
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecl:stabus:3672

Access Statistics for this paper

More papers in Research Papers from Stanford University, Graduate School of Business Contact information at EDIRC.
Bibliographic data for series maintained by ().