What explains the difference between bank and non-bank leverage?

Tobias Berg, Jasmin Gider

Research output: Contribution to journalArticleScientificpeer-review

29 Citations (Scopus)


Banks have much more leverage than nonbanks. In this article, we use a joint sample of banks and nonbanks between 1965 and 2013 to analyze the determinants of this leverage difference. We find that a single factor, asset risk, is able to explain up to 90% of this difference. Banks’ assets consist of a diversified portfolio of nonbank debt. Therefore, banks have much lower asset risk than do nonbanks. Because asset risk is a major determinant of capital structure choice, this factor is able to explain a large fraction of the difference between bank and nonbank leverage.
Original languageEnglish
Pages (from-to)2677-2702
JournalJournal of Financial and Quantitative Analysis
Issue number6
Publication statusPublished - Dec 2017
Externally publishedYes


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