Implications of Corporate Capital Structure Theory for Banking Institutions

Yair E. Orgler and Robert A. Taggart, Jr.

No 737, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper applies some recent advances in corporate capital structure theory to the determination of optimal capital in banking. The effects of corporate and personal taxes, government regulation, the technology of producing deposit services and the costs of bankruptcy and agency problems are all discussed in the context of the U.S. commercial banking system. The analysis suggests explanations for why commercial banks tend to have relatively less capital than nonfinancial firms, why commercial bank leverage has tended to increase over time and why large banks tend to have relatively less capital than small banks.

Date: 1981-08
Note: ME
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Citations: View citations in EconPapers (17)

Published as Orgler, Yair E. and Robert A. Taggart, Jr. "Implications of Corporate Capital Structure Theory for Banking Institutions." Journal of Money, Credit and Banking, Vol. 15, No. 2 (May 1983), pp.212-221.

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