The Real Effects of Bank Capital Requirements
© 2019 INFORMS. We measure the impact of bank capital requirements on corporate borrowing, investment, and employment using loan-level data. The Basel II regulatory framework makes capital requirements vary across both banks and firms, which allows us to control for time-varying firm-level risk and...
| Main Authors: | , , |
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| Other Authors: | |
| Format: | Article |
| Language: | English |
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Institute for Operations Research and the Management Sciences (INFORMS)
2021
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| Online Access: | https://hdl.handle.net/1721.1/136646 |
| _version_ | 1826217265905795072 |
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| author | Fraisse, Henri Lé, Mathias Thesmar, David |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Fraisse, Henri Lé, Mathias Thesmar, David |
| author_sort | Fraisse, Henri |
| collection | MIT |
| description | © 2019 INFORMS. We measure the impact of bank capital requirements on corporate borrowing, investment, and employment using loan-level data. The Basel II regulatory framework makes capital requirements vary across both banks and firms, which allows us to control for time-varying firm-level risk and bank-level credit supply shocks. We find that a 1 percentage point increase in capital requirements reduces lending by 2.3%-4.5%. Firms can attenuate this reduction by substituting borrowing across banks, but only to a limited extent. The resulting reduction in borrowing capacity affects significantly both investment and employment: for firmswhose effective capital requirements increase by 1 percentage point, fixed assets are reduced by 1.1%, capital expenditures by 2.7%, and employment by 0.8%. |
| first_indexed | 2024-09-23T17:00:38Z |
| format | Article |
| id | mit-1721.1/136646 |
| institution | Massachusetts Institute of Technology |
| language | English |
| last_indexed | 2024-09-23T17:00:38Z |
| publishDate | 2021 |
| publisher | Institute for Operations Research and the Management Sciences (INFORMS) |
| record_format | dspace |
| spelling | mit-1721.1/1366462023-01-10T19:14:37Z The Real Effects of Bank Capital Requirements Fraisse, Henri Lé, Mathias Thesmar, David Sloan School of Management © 2019 INFORMS. We measure the impact of bank capital requirements on corporate borrowing, investment, and employment using loan-level data. The Basel II regulatory framework makes capital requirements vary across both banks and firms, which allows us to control for time-varying firm-level risk and bank-level credit supply shocks. We find that a 1 percentage point increase in capital requirements reduces lending by 2.3%-4.5%. Firms can attenuate this reduction by substituting borrowing across banks, but only to a limited extent. The resulting reduction in borrowing capacity affects significantly both investment and employment: for firmswhose effective capital requirements increase by 1 percentage point, fixed assets are reduced by 1.1%, capital expenditures by 2.7%, and employment by 0.8%. 2021-10-27T20:36:25Z 2021-10-27T20:36:25Z 2020 2021-04-01T15:14:54Z Article http://purl.org/eprint/type/JournalArticle https://hdl.handle.net/1721.1/136646 en 10.1287/MNSC.2018.3222 Management Science Creative Commons Attribution-Noncommercial-Share Alike http://creativecommons.org/licenses/by-nc-sa/4.0/ application/pdf Institute for Operations Research and the Management Sciences (INFORMS) SSRN |
| spellingShingle | Fraisse, Henri Lé, Mathias Thesmar, David The Real Effects of Bank Capital Requirements |
| title | The Real Effects of Bank Capital Requirements |
| title_full | The Real Effects of Bank Capital Requirements |
| title_fullStr | The Real Effects of Bank Capital Requirements |
| title_full_unstemmed | The Real Effects of Bank Capital Requirements |
| title_short | The Real Effects of Bank Capital Requirements |
| title_sort | real effects of bank capital requirements |
| url | https://hdl.handle.net/1721.1/136646 |
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