Скачать или смотреть Seminar: The countercyclical KVA and dynamic capital structure adjustment

This seminar was delivered on Wednesday, 28 October 2020 as part of the CGF Seminar series 2020-2021

Full title: The countercyclical KVA and dynamic capital structure adjustment: evidence from US bank holding companies

Speaker: Standley Réginald Baron, Laval University, Canada

Chair: Professor Victor Murinde, SOAS University of London

Abstract:

This paper analyzes the role that the cost of capital requirement could play in explaining banks’ capital ratio speed of adjustment. We find that the cost of capital requirement differences across banks is the main source of asymmetries in capital structure speed of adjustment. Specifically, banks facing higher cost of capital requirement adjust their capital ratio faster toward the target level. To achieve this result, banks use liability and asset sides as a mechanism of adjustment. However, in economic downturn banks generally decrease their tier 1 capital, which reinforces the need to hold countercyclical capital buffer to ride against the cycle.