The Effect of Leverage on Asset Sales Between Financial Institutions

Author/Editor:

Sonali Das

Publication Date:

September 8, 2017

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

This paper analyzes how the leverage of financial institutions affects their demand for assets and the resulting value of transactions between financial institutions. The results show a positive relationship between buyer capital and the likelihood of buying assets, and between buyer capital and the value of the deal. That is, those institutions that are the least constrained in their ability to raise funding are those that demand assets and pay more for them. This result does not hold, however, for deposit-taking institutions that had access to several government programs designed to improve their liquidity position during the crisis of 2008.

Series:

Working Paper No. 17/200

English

Publication Date:

September 8, 2017

ISBN/ISSN:

9781484318171/1018-5941

Stock No:

WPIEA2017200

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

17

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