On May 9, 2010 euro zone countries announced the creation of the European Financial Stability Facility as a response to the sovereign debt crisis. This paper investigates the impact of this announcement on bank share prices, bank CDS spreads and sovereign CDS spreads. The main private...

We document that large European banks hold sovereign debt portfolios heavily biased toward domestic government debt. This bias is stronger if the sovereign is risky and shareholder rights are strong, as evidence of a risk-shifting explanation of the home bias. In addition, the bias is stronger...

The tax-benefit of interest deductibility encourages debt financing, but regulatory and market constraints create dependency between bank leverage and risk. Using a large international sample of banks this paper estimates the short and long run effects of corporate income taxes (CIT) on bank...

We estimate expected bail-in costs for an international sample of banks by comparing spreads of credit default swaps (CDS) that only differ in terms of whether they insure against the bailing in of a distressed banks’ creditors. Using these estimated bail-in costs we study bank risk taking...