Department of Economics and Business Economics

Modigliani-Miller, Basel 3 and CRD 4

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

Since 2007, bank capital regulation has been strengthened in Europe and globally. Bank organizations have expressed serious concerns about the impact of higher capital requirements on bank funding costs adn on the lending capacity of banks. The message of a 1958-Article by Modigliani and Miller is that bankers should not worry. Changes in the debt-equity ratio do not affect the firm's average cost of capital. With reference to a sample of recent empirical studies, this SUERF Policy Note concludes that the thougher and more complex capital regulation requires modification but not rejection of the M&M analysis.
Original languageEnglish
JournalSUERF Policy Notes
Pages (from-to)1-8
Number of pages8
Publication statusPublished - 2015

    Research areas

  • Basel 3, Bank capital regulation, Capital adequacy, Capital requirements directive, Capital structure irrelevance, Cost of capital

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