Banks’ Leverage Evolution: The Case of Commercial Banks
This paper used a panel dataset on the post-Basel-I period to compare the evolution of leverage ratios between commercial and investment banks before the 2007 financial crisis. The comparison showed that the quality of the capital base of commercial banks has been deteriorating since well before the...
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| Format: | Article |
| Language: | English |
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MDPI AG
2023-06-01
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| Series: | Mathematics |
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| Online Access: | https://www.mdpi.com/2227-7390/11/13/2860 |
| _version_ | 1797591310277804032 |
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| author | Michele Piffer |
| author_facet | Michele Piffer |
| author_sort | Michele Piffer |
| collection | DOAJ |
| description | This paper used a panel dataset on the post-Basel-I period to compare the evolution of leverage ratios between commercial and investment banks before the 2007 financial crisis. The comparison showed that the quality of the capital base of commercial banks has been deteriorating since well before the 2007 crisis at a much faster pace than that of investment banks. This paper explains why traditional measures of leverage cannot display this phenomenon and proposes the ratio of the book value of assets over tangible common equity as a better measure. |
| first_indexed | 2024-03-11T01:35:36Z |
| format | Article |
| id | doaj.art-da13aed447954fffa3c1537bdcaad4e5 |
| institution | Directory Open Access Journal |
| issn | 2227-7390 |
| language | English |
| last_indexed | 2024-03-11T01:35:36Z |
| publishDate | 2023-06-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Mathematics |
| spelling | doaj.art-da13aed447954fffa3c1537bdcaad4e52023-11-18T17:02:23ZengMDPI AGMathematics2227-73902023-06-011113286010.3390/math11132860Banks’ Leverage Evolution: The Case of Commercial BanksMichele Piffer0King’s College London, King’s Business School, Bush House, 30 Aldwych, London WC2B 4BG, UKThis paper used a panel dataset on the post-Basel-I period to compare the evolution of leverage ratios between commercial and investment banks before the 2007 financial crisis. The comparison showed that the quality of the capital base of commercial banks has been deteriorating since well before the 2007 crisis at a much faster pace than that of investment banks. This paper explains why traditional measures of leverage cannot display this phenomenon and proposes the ratio of the book value of assets over tangible common equity as a better measure.https://www.mdpi.com/2227-7390/11/13/2860leveragebanking sectorfinancial crises |
| spellingShingle | Michele Piffer Banks’ Leverage Evolution: The Case of Commercial Banks Mathematics leverage banking sector financial crises |
| title | Banks’ Leverage Evolution: The Case of Commercial Banks |
| title_full | Banks’ Leverage Evolution: The Case of Commercial Banks |
| title_fullStr | Banks’ Leverage Evolution: The Case of Commercial Banks |
| title_full_unstemmed | Banks’ Leverage Evolution: The Case of Commercial Banks |
| title_short | Banks’ Leverage Evolution: The Case of Commercial Banks |
| title_sort | banks leverage evolution the case of commercial banks |
| topic | leverage banking sector financial crises |
| url | https://www.mdpi.com/2227-7390/11/13/2860 |
| work_keys_str_mv | AT michelepiffer banksleverageevolutionthecaseofcommercialbanks |