A Q-Theory Of Banks

Juliane Begenau, Saki Bigio, Jeremy Majerovitz and Matias Vieyra
Additional contact information
Juliane Begenau: Stanford GSB and NBER and CEPR
Jeremy Majerovitz: MIT
Matias Vieyra: Bank of Canada

No 171, Working Papers from Peruvian Economic Association

Abstract: We document five facts about banks: (1) market and book leverage diverged during the 2008 crisis, (2) Tobin's Q predicts future profitability, (3) neither book nor market leverage appears constrained, (4) banks maintain a market leverage target that is reached slowly, (5) pre-crisis, leverage was predominantly adjusted by liquidating assets. After the crisis, the adjustment shifted towards retaining earnings. We present a Q-theory where leverage notions differ because book accounting is slow to acknowledge loan losses. We estimate the model and show that it reproduces the facts. We examine counterfactuals: different accounting rules produce a novel policy tradeoff.

Keywords: Banks; Tobin's Q; Delayed Accounting; Adjustment Costs (search for similar items in EconPapers)
JEL-codes: E44 G21 G32 G33 (search for similar items in EconPapers)
Date: 2020-11
New Economics Papers: this item is included in nep-acc, nep-ban, nep-cfn and nep-mac
References: View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://perueconomics.org/wp-content/uploads/2020/11/WP-171.pdf Application/pdf

Related works:
Working Paper: A Q-Theory of Banks (2024)
Working Paper: A Q-Theory of Banks (2021)
Working Paper: A Q-Theory of Banks (2021)
Working Paper: A q-theory of banks (2021)
Working Paper: A Q-Theory of Banks (2020)
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:apc:wpaper:171

Access Statistics for this paper

More papers in Working Papers from Peruvian Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Nelson Ramírez-Rondán ().