The Effect of Leverage on Asset Sales Between Financial Institutions

Author: Miss Sonali Das

Volume/Issue: Volume 2017 Issue 200

Publication date: September 2017

ISBN: 9781484318171

$20.00

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Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Banks and Banking , Finance , Agribusiness , WP , asset , buyer , capital , value , Asset sales , financial intermediaries , balance sheets , leverage , deal value , buyer asset growth , asset-market liquidity , buyer assets , buyer market assets , assets ratio , buyer log , asset liquidation , property assets , Capital adequacy requirements , Asset valuation , Agroindustries , Stock markets , Asset management , Global

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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.