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Dietrich, D. and Hauck, A. 
ORCID: 0000-0002-6949-6732,
2014.
Bank capital regulation, loan contracts, and corporate investment.
The Quarterly Review of Economics and Finance, 54 (2), pp. 230-241.
ISSN 1062-9769
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Abstract
This paper studies the link between bank capital regulation, bank loan contracts and the allocation of corporate resources across firms’ different business lines. Credit risk is lower when firms write contracts that oblige them to invest mainly into projects with highly tangible assets. We argue that firms have an incentive to choose a contract with overly safe and thus inefficient investments when intermediation costs are increasing in banks’ capital-to-asset ratio. Imposing minimum capital adequacy for banks can eliminate this incentive by putting a lower bound on financing costs.
| Item Type: | Journal article | ||||||
|---|---|---|---|---|---|---|---|
| Publication Title: | The Quarterly Review of Economics and Finance | ||||||
| Creators: | Dietrich, D. and Hauck, A. | ||||||
| Publisher: | Elsevier | ||||||
| Date: | 2014 | ||||||
| Volume: | 54 | ||||||
| Number: | 2 | ||||||
| ISSN: | 1062-9769 | ||||||
| Identifiers: |
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| Divisions: | Schools > Nottingham Business School | ||||||
| Record created by: | Jonathan Gallacher | ||||||
| Date Added: | 22 Feb 2019 09:20 | ||||||
| Last Modified: | 22 Feb 2019 09:20 | ||||||
| URI: | https://irep.ntu.ac.uk/id/eprint/35792 |
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