Write-Down Bonds and Bank Capital Structure
摘要：We develop a model of optimal bank capital structure that incorporates deposits, subordinated debt, Write-Down (WD) bond and equity. WD bond's principal write-down, bank run, regulatory closure and bankruptcy are triggered if the bank’s asset value hits specific barriers. Value-maximizing banks choose the ratio of deposits to subordinated debt and WD debt so that endogenous default coincides with bank closure. The bank increases its leverage by swapping both deposits and subordinated debt for WD bonds. However, the issuance of WD bonds not only reduces expected bankruptcy loss and credit spread of subordinated debt, but also improves bank value. Banks' optimal response to regulatory changes often counteracts regulators' objective in reducing bank failures. Write-down ratio does not affect bank value, deposit ratio, credit spread of subordinated debt and bank leverage in our model. And higher write-down ratio causes lower WD debt ratio, higher credit spread of WD debt and higher subordinated debt ratio. Write-down trigger parameter does not influence deposit ratio, subordinated debt ratio and credit spread of subordinated debt. Interestingly, it just has slightly influence on bank value.