A Q-Theory of Banks

Juliane Begenau, Saki Bigio, Jeremy Majerovitz and Matias Vieyra

No 9356, CESifo Working Paper Series from CESifo

Abstract: We propose a dynamic bank theory with a delayed loss recognition mechanism and a regulatory capital constraint at its core. The estimated model matches four facts about banks’ Tobin’s Q that summarize bank leverage dynamics. (1) Book and market equity values diverge, especially during crises; (2) Tobin’s Q predicts future bank profitability; (3) neither book nor market leverage constraints are binding for most banks; (4) bank leverage and Tobin’s Q are mean reverting but highly persistent. We examine a counterfactual experiment where different accounting rules produce a novel policy tradeoff.

Keywords: banks; leverage dynamics; market vs. book values; delayed accounting (search for similar items in EconPapers)
JEL-codes: E44 G21 G32 G33 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-acc, nep-ban, nep-cwa and nep-mac
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Citations: View citations in EconPapers (1)

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https://www.cesifo.org/DocDL/cesifo1_wp9356.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 (2020)
Working Paper: A Q-Theory of Banks (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9356

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