Regulatory changes and the cost of equity: evidence from French banks
In the paper, we first investigate the impact of an increase in capital requirements on the equity risk (beta) of listed banks in France. We find that an increase in capital ratios reduces banks’ systematic risk. This leads to a decrease in shareholders’ required return on equity, providing evidence in favour of the Modigliani-Miller theorem: the greater cost of capital due to higher capital ratios appears to be mitigated by the decrease in shareholders’ expected return on equity. We then analyze the impact of liquidity position and find almost no evidence so far that investors take banks’ liquidity risk into account.
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Regulatory changes and the cost of equity: evidence from French banks
- Publié le 07/03/2014
- FR
- PDF (398.21 Ko)
Mis à jour le : 19/03/2019 15:47