Going-Concern Debt of Financial Intermediaries

65 Pages Posted: 25 Jan 2021

See all articles by Yueran Ma

Yueran Ma

University of Chicago - Booth School of Business

José Scheinkman

Columbia University; Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

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Date Written: November 15, 2020

Abstract

We study asset and debt characteristics of US bank holding companies. We show that financial institutions, especially large institutions, are not just about holding discrete assets. Services and going-concern values are important, and capital market debt against going-concern values accounts for 10% to 15% of total assets, comparable to the volume of capital market debt against discrete assets. We find that financial institutions' debt against going-concern values has weak monitoring, relative to similar debt among non-financial firms. We argue that weak monitoring prevails because creditors cannot easily punish or restructure these institutions should they violate covenants, which limits covenants' usefulness.

Keywords: financial institutions, going-concern debt, debt covenants, creditor control

JEL Classification: G21, G28, G32

Suggested Citation

Ma, Yueran and Scheinkman, José, Going-Concern Debt of Financial Intermediaries (November 15, 2020). Available at SSRN: https://ssrn.com/abstract=3725957 or http://dx.doi.org/10.2139/ssrn.3725957

Yueran Ma (Contact Author)

University of Chicago - Booth School of Business ( email )

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José Scheinkman

Columbia University ( email )

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