| 来源类型 | Working Paper
|
| 规范类型 | 报告
|
| DOI | 10.3386/w19018
|
| 来源ID | Working Paper 19018
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| Do Strict Capital Requirements Raise the Cost of Capital? Banking Regulation and the Low Risk Anomaly |
| Malcolm Baker; Jeffrey Wurgler
|
| 发表日期 | 2013-05-02
|
| 出版年 | 2013
|
| 语种 | 英语
|
| 摘要 | Minimum capital requirements are a central tool of banking regulation. Setting them balances a number of factors, including any effects on the cost of capital and in turn the rates available to borrowers. Standard theory predicts that, in perfect and efficient capital markets, reducing banks' leverage reduces the risk and cost of equity but leaves the overall weighted average cost of capital unchanged. We test these two predictions using U.S. data. We confirm that the equity of better-capitalized banks has lower systematic risk (beta) and lower idiosyncratic risk. However, over the last 40 years, lower risk banks have higher stock returns on a risk-adjusted or even a raw basis, consistent with a stock market anomaly previously documented in other samples. The size of the low risk anomaly within banks suggests that the cost of capital effects of capital requirements may be considerable. Assuming competitive lending markets, banks' low asset betas implied an average risk premium of only 40 basis points above Treasury yields in our sample period; a calibration suggests that a ten percentage-point increase in Tier 1 capital to risk-weighted assets may have increased this to between 100 and 130 basis points per year. In summary, the low risk anomaly in the stock market produces a potentially significant cost of capital requirements. |
| 主题 | Financial Economics
; Financial Markets
; Financial Institutions
; Corporate Finance
|
| URL | https://www.nber.org/papers/w19018
|
| 来源智库 | National Bureau of Economic Research (United States)
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| 引用统计 |
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| 资源类型 | 智库出版物
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| 条目标识符 | http://119.78.100.153/handle/2XGU8XDN/576691
|
推荐引用方式
GB/T 7714 |
Malcolm Baker,Jeffrey Wurgler. Do Strict Capital Requirements Raise the Cost of Capital? Banking Regulation and the Low Risk Anomaly. 2013.
|
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