Topic: The Redistributive Effects of Bank Capital Regulation

Speaker: Robert S. Marquez, Professor of Finance, University of California, Davis

Date: November 1st (Wednesday)

Time: 10:00-11:30am

Location: Building 4, Room 101

Language: English

Abstract:

We build a general equilibrium model of banks' optimal capital structure, where investors are reluctant to invest in financial products other than deposits, and where bankruptcy is costly. We first show that banks raise both deposits and equity, and that investors are willing to hold equity only if adequately compensated. We then introduce (binding) capital requirements and show that: (i) it distorts investment away from productive projects toward storage; or (ii) it increases the cost of raising capital for banks, with the bulk of this cost accruing to depositors. These results hold also when we extend the model to incorporate various rationales justifying capital regulation.     

About the speaker:

Robert Marquez received a PhD in Economics from the Massachusetts Institute of Technology and an A.B. in Economics from the University of California, Berkeley.  He is a Professor in the Graduate School of Management at the University of California, Davis. Prior to this, Marquez was an Associate Professor of Finance at the School of Management of Boston University, and was the Craig and Rhonda Cerny Associate Professor of Finance at Arizona State University. He has held various visiting positions at the FDIC and the U.S. Federal Reserve system.

Marquez’s research focuses on the issue of competition among financial institutions and its implications for the allocation of credit.  Specifically, he is interested in analyzing how information problems for financial intermediaries interact with the way in which banks compete.  He has used this general framework to analyze issues of entry into banking markets, the acquisition of information about borrowers, the use of information technology, and changes in the structure of banking markets.  He has also done work studying regulation in banking when the economies in which the banks operate are financially integrated. More recently, Marquez’s work has focused on the design of financial contracts, and on theoretical issues within private equity markets and mergers and acquisitions.

Marquez’s research has been published in leading finance and economics journals, including the Journal of Finance, the Journal of Financial Economics, the Review of Financial Studies, Econometrica, the Journal of Economic Theory, and the RAND Journal of Economics. Currently, Marquez is an Associate Editor of Management Science.