Does size matter? Bailouts with large and small banks
Abstract
We explore how large and small banks make funding decisions when system-wide bailouts are possible. We show that bank size, purely on strategic grounds, is a key determinant of banks’ leverage choices, even when bailout policies treat large and small banks symmetrically. Large banks leverage more than small banks because they internalize that their decisions directly affect bailout policies. In equilibrium, this effect is amplified by strategic...
Paper Details
Title
Does size matter? Bailouts with large and small banks
Published Date
Apr 1, 2020
Volume
136
Issue
1
Pages
1 - 22
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