Is the leverage of European banks procyclical?
Angelo Baglioni (),
Andrea Boitani () and
Empirical Economics, 2013, vol. 45, issue 3, 1251-1266
Detecting whether banks’ leverage is indeed procyclical is relevant to support the view that booms and crises may be reinforced by some sort of supply side financial accelerator, whilst finding a plausible explanation of banks’ behaviour is crucial to trace the road for a sensible reform of financial regulation and managers’ incentives. By analyzing a large sample of European banks, we show that procyclical leverage appears to be well entrenched in the behaviour of those banks for which investment banking prevails over the traditional commercial banking activity. Copyright Springer-Verlag Berlin Heidelberg 2013
Keywords: Banks; Procyclicality; Financial regulation; Leverage; G21; E3 (search for similar items in EconPapers)
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