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Type | Journal Article |
Scope | Discipline-based scholarship |
Title | Banks response to higher capital requirements: evidence from a quasi-natural experiment |
Organization Unit | |
Authors |
|
Item Subtype | Original Work |
Refereed | Yes |
Status | Published in final form |
Language |
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Journal Title | Review of Financial Studies |
Publisher | Oxford University Press |
Geographical Reach | international |
ISSN | 0893-9454 |
Volume | 32 |
Number | 1 |
Page Range | 266 - 299 |
Date | 2019 |
Abstract Text | We study the impact of higher capital requirements on banks’ balance sheets and its transmission to the real economy. The 2011 EBA capital exercise is an almost ideal quasi-natural experiment to identify this impact with a difference-in-differences matching estimator. We find that treated banks increase their capital ratios by reducing their risk-weighted assets and - consistent with debt overhang - not by raising their levels of equity. Banks reduce lending to corporate and retail customers, resulting in lower asset-, investment- and sales growth for firms obtaining a larger share of their bank credit from the treated banks. |
Digital Object Identifier | 10.1093/rfs/hhy052 |
Other Identification Number | merlin-id:16245 |
PDF File | Download from ZORA |
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