To analyze the joint choice of payout and risk-taking policies, we extend the model and allow the bank to make a risk-taking decision beyond the payout decision. [...] The analysis of the interaction between payout restrictions and risk-taking contributes to the strand of the literature focusing on bank regulation and risk-taking decisions. [...] 3 Empirical Strategy The aim of the remainder of the paper consists of empirically testing the theoretical channels of payout restrictions outlined in the previous section. [...] This ensures that the CDS response we measure is not driven by valuation effects pertaining to the value of the underlying collateral, in the case of secured bonds, or the value of equity, in the case of convertible bonds. [...] The lower number of observations for the probability of default, PD, compared to the committed amount on Panel A is due to one bank in the sample which does not rely on the internal rating based approach.
Authors
- Pages
- 83
- Published in
- United States of America
Table of Contents
- Introduction -1
- Conceptual Framework -1
- Environment -1
- Equity and Debt Values -1
- Properties -1
- Risk-taking Choice -1
- Empirical Strategy -1
- Institutional Setting -1
- Comprehensive Capital Analysis and Review (CCAR) -1
- 06/25/2020 -1
- 12/18/2020 -1
- Main Hypotheses -1
- Data -1
- Summary Statistics -1
- Estimation -1
- Equity Response -1
- Debt Response -1
- Effects on Risk-Taking in Lending -1
- Empirical Results for Payouts, Equity and Debt Prices -1
- Overview of CCAR banks -1
- Equity Response -1
- 06/25/2020 - Imposing Payout Restrictions -1
- 12/18/2020 - Lifting Payout Restrictions -1
- Abnormal Returns around Announcements -1
- Debt Values -1
- 06/25/2020 -1
- 12/18/2020 -1
- Additional Results -1
- Empirical Results for Risk-taking Decisions -1
- Heterogeneity in Payout Decisions -1
- Empirical Evidence on Risk-Taking in Lending -1
- Conclusion -1
- Data Sources and Construction -1
- CRSP -1
- TAQ -1
- Compustat Global Security Daily -1
- Debt Prices: TRACE and Mergent FISD -1
- FR-Y9C -1
- FR Y-14Q -1
- Proofs of Theoretical Model -1
- Proof of Proposition 2.2 -1
- Proof of Proposition 2.4 -1
- Proof of Proposition 2.5 -1
- Proof of Proposition 2.6 -1
- Proof of Proposition 2.7 -1
- Summary Statistics -1
- TAQ data -1
- CDS Data -1
- Corporate Bond Data -1
- Narrative Evidence around Payout Restriction Announcements -1
- Further Results -1
- Further Evidence on Payouts -1
- Bank Capital around Payout Restriction Announcements -1
- Further Balance Sheet Variables -1
- Parallel Trends around Payout Restriction Announcements -1
- Cumulative Abnormal Returns Estimation -1
- Longer-run Evidence -1
- Removal of Last Restrictions on 03/25/2021 -1
- Term Structure of CDS Response -1
- Robustness Checks for Cumulative Abnormal Returns -1
- Results from Fama-French 3-factor model -1
- Corporate Bond Results -1
- Loan Loss Reserves -1
- Evidence from other Jurisdictions -1
- Additional Lending Results -1
- Raw Triple DiD plot -1
- Detailed Regression Tables from Equation 7 -1
- Results for Interest Rate -1
