We develop a model of the joint capital structure decisions of banks and their borrowers. Strikingly high bank leverage … take on high leverage safely; supply chain effects compel them to do so. Firms with low leverage also arise naturally, as … framework underlie our model, we can quantify the impact capital regulation and other government interventions have on leverage …

. By looking at 5,500 issues over the period 2005-2012, we find that in recent years the sovereign debt market turbulence … premium due to the negative spillovers from the sovereign debt crisis, while German firms got a discount of 40 basis points. …

, whereas greater use of debt leads to a higher probability of inefficient bank liquidation. The bank's privately … leverage relative to the socially optimal level, providing a rationale for bank capital regulation. While a blanket regulatory …

. By looking at 5,500 issues in the period 2005-2012, we find that the turbulence in the sovereign debt market has been a … due to the negative spillovers from the sovereign debt crisis, while German firms received a discount of 40 basis points …

The aim of this paper is to analyse the influence of financial system liquidity and corporate leverage on a firm …'s overinvestment. We posit that when external funds are easily available, as in expansionary monetary periods, debt loses its … traditional role as a managerial control mechanism. Instead, the supply of systemic liquidity results in corporate leverage …