We present a model where bank assets are a portfolio of risky debt claims and analyze stockholders' risk-taking behavior while considering the strategic interaction between debtors and creditors. We find that: (1) as the leverage of a bank increases, risk shifting by borrowers increases, even if...

We study the effects of the 2008 crisis and Basel III guidelines on the content of the financial reports of Israeli banks, which are highly regulated and follow the Basel guidelines. Our findings, based on LDA topic modeling and term frequency, indicate that already at the time of the crisis...

We study the influence of unsecured debt (subdebt) and of bail-in debt on banks' risk-taking in a contingent claim model, while considering the bargaining between stockholders and debtholders. We show that replacing stock with subdebt: (1) leads to fewer risk-shifting events, but generates a...