An important role for bank capital is that of a buffer against unexpected losses. As uncertainty about these losses increases, the theory predicts an increase i

Recent studies show that uncertainty shocks have quantitatively important effects on the real economy. This paper examines one particular channel at work: the s

Rollover risk imposes market discipline on banks’ risk-taking behavior but it can be socially costly. I present a two-sided model in which a bank simultaneous

How should firms decide whether and when to invest in new capital equipment, additions to their workforce, or the development of new products? Why have traditio

Using a multi-country panel of banks, we study whether better capitalized banks experienced higher stock returns during the financial crisis. We differentiate a