-funded capital injections. However, on closer inspection the composition of bank capital shifted radically from one based on common … was exacerbated by large scale payments of dividends, in spite of widely anticipated credit losses. Dividend payments …

. This way, one bank's dividend payout policy affects the equity value and risk of default of other banks. When such negative … behavior. By paying out dividends, a bank transfers value to its shareholders away from creditors, among whom are other banks … externalities are strong and bank franchise values are not too low, the private equilibrium can feature excess dividends relative to …

privately-optimal level of bank leverage is neither too low nor too high: It efficiently balances the market discipline that … of leverage. However, when correlated bank failures can impose significant social costs, regulators may bail out bank … this also compromises market discipline by making bank debt too safe. Optimal capital regulation requires that a part of …

in turn are other banks. This way, one bank's dividend payout policy aects the equity value and risk of default of otther … smooth dividend policy. We present a model that explains this behavior in a setting where there are financial externalities … across banks. In particular, by paying out dividends, a bank transfers value to its shareholders away from its creditors, who …

benefits of universal banking. We find that a firm whose equity was underwritten by a bank-affiliated underwriter, when the … same bank was also a large creditor of the firm in the IPO year, exhibits significantly better than average post …. When an investment fund managed by the same bank is heavily involved in the IPO as buyer of the newly-issued equity, the …

Today’s regulatory rules, especially the easily-manipulated measures of regulatory capital, have led to costly bank … failures. We design a robust regulatory system such that (i) bank losses are credibly borne by the private sector (ii …) systemically important institutions cannot collapse suddenly; (iii) bank investment is counter-cyclical; and (iv) regulatory …

creating counter-cyclical incentives for banks to raise capital, and so encourage bank lending in bad times. They avoid the …

requirements, more so by banks with less capital, and while still providing recourse to bank balance sheets for outside investors …

the security level for each bank in each period, we find that during the crisis, banks with higher trading expertise …