Implications of Corporate Capital Structure Theory for Banking Institutions

37 Pages Posted: 12 Jul 2010 Last revised: 28 Dec 2011

See all articles by Yair Orgler

Yair Orgler

Tel Aviv University

Robert A. Taggart, Jr.

Northwestern University

Date Written: August 1981

Abstract

This paper applies some recent advances in corporate capital structure theory to the determination of optimal capital in banking. The effects of corporate and personal taxes, government regulation, the technology of producing deposit services and the costs of bankruptcy and agency problems are all discussed in the context of the U.S. commercial banking system. The analysis suggests explanations for why commercial banks tend to have relatively less capital than nonfinancial firms, why commercial bank leverage has tended to increase over time and why large banks tend to have relatively less capital than small banks.

Suggested Citation

Orgler, Yair and Jr., Robert A. Taggart,, Implications of Corporate Capital Structure Theory for Banking Institutions (August 1981). NBER Working Paper No. w0737. Available at SSRN: https://ssrn.com/abstract=1636590

Yair Orgler (Contact Author)

Tel Aviv University ( email )

Ramat Aviv
Tel-Aviv, 6997801
Israel

Robert A. Taggart, Jr.

Northwestern University

2001 Sheridan Road
Evanston, IL 60208
United States

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