Going-Concern Debt of Financial Intermediaries

Yueran Ma and Jose Scheinkman

No 28088, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study asset and debt characteristics of US bank holding companies. We show that financial institutions, especially large institutions, are not just about holding discrete assets. Services and going-concern values are important, and capital market debt against going-concern values accounts for 10% to 15% of total assets, comparable to the volume of capital market debt against discrete assets. We find that financial institutions’ debt against going-concern values has weak monitoring, relative to similar debt among non-financial firms. We argue that weak monitoring prevails because creditors cannot easily punish or restructure these institutions should they violate covenants, which limits covenants’ usefulness.

JEL-codes: G21 G28 G32 (search for similar items in EconPapers)
Date: 2020-11
New Economics Papers: this item is included in nep-ban and nep-cfn
Note: AP CF
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