Data Lessons on Bank Behavior

Juliane Begenau, Jeremy Majerovitz and Saki Bigio
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Juliane Begenau: Stanford University

No 161, 2018 Meeting Papers from Society for Economic Dynamics

Abstract: We investigate the behavior of bank balance sheet's in the United States during 2007-2015. The goal is to deepen the understanding of the behavior of banks. During this period, bank aggregate book-equity losses were entirely offset by equity issuances whereas market-value losses were catastrophic and never recovered. We find evidence that supports a theory where banks target market leverage, but where adjustments to a target are very gradual. We also find that, in contrast to the pre-crisis period, during the post-crisis banks relied more on retained earnings rather than on assets sales to adjust to a market leverage target. We present a heterogeneous-bank model that rationalizes these facts and can serve as a building block for future work.

Date: 2018
New Economics Papers: this item is included in nep-ban
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed018:161

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