A Q-Theory of Banks
Jeremy Majerovitz and
Matias Vieyra ()
No 27935, NBER Working Papers from National Bureau of Economic Research, Inc
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.
JEL-codes: G21 G32 G33 (search for similar items in EconPapers)
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Working Paper: A Q-Theory of Banks (2021)
Working Paper: A Q-Theory Of Banks (2020)
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