Abstract: A Portfolio Model for Identifying Banks Operating under Capital Constraints

Willard T. Carleton and Hugh S. McLaughlin

Journal of Financial and Quantitative Analysis, 1977, vol. 12, issue 4, 643-643

Abstract: The paper presents evidence suggesting that banks with very low and very high capital positions respond to interest rate changes differently from other banks. The concept of a capital constraint is introduced to explain this phenomenon. The hypothesis is that banks with a binding capital constraint should exhibit different asset management decisions from those banks which are unconstrained. The regression results indicate that low-capital banks for the years 1973-74 and 1974-75 did not respond to earnings in an economic fashion.

Date: 1977
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Persistent link: https://EconPapers.repec.org/RePEc:cup:jfinqa:v:12:y:1977:i:04:p:643-643_02

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