Economics at your fingertips  

Bank Leverage: Does Currency Diversification Really Matter?

Justine Pedrono () and Aurélien Violon

No 1543, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: Theoretically, as currency diversification affects directly the total composition of banks collateral, it changes their debt capacity and their resilience to economic shocks. Thus, currency diversification should be relevant to the leverage and the leverage procyclicality. However, empirical investigations on this subject are still missing. Using very confidential data on credit institutions located in France between 1999 and 2014, we examine whether currency diversification is pertinent for both the leverage procyclicality and the determination of leverage. Our results confirm previous analysis on leverage procyclicality and capital structure decision. Regarding currency diversification, our results suggest that the currency dimension is relevant: higher currency diversification implies lower leverage. Finally, including the currency mismatch dimension in our analysis supports the theoretical conclusion. Currency mismatch is mostly irrelevant for the definition of the leverage.

Keywords: procyclical leverage; capital structure; currency diversification; currency mismatch (search for similar items in EconPapers)
Pages: 36 pages
Date: 2015-10-16, Revised 2015-10-16
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (application/pdf)

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:

Access Statistics for this paper

More papers in AMSE Working Papers from Aix-Marseille School of Economics, France AMU-AMSE - 5-9 Boulevard Maurice Bourdet, CS 50498 - 13205 Marseille Cedex 1. Contact information at EDIRC.
Bibliographic data for series maintained by Gregory Cornu ().

Page updated 2022-10-01
Handle: RePEc:aim:wpaimx:1543