The Decline of Too Big to Fail
| dc.contributor.author | Berndt, Antje | en |
| dc.contributor.author | Duffie, Darrell | en |
| dc.contributor.author | Zhu, Yichao | en |
| dc.date.accessioned | 2025-05-23T12:23:18Z | |
| dc.date.available | 2025-05-23T12:23:18Z | |
| dc.date.issued | 2025 | en |
| dc.description.abstract | For globally systemically important banks (GSIBs) with US headquarters, we find significant reductions in market-implied probabilities of government bailout after the Global Financial Crisis (GFC), along with roughly 170 percent higher wholesale debt financing costs for these banks after controlling for insolvency risk. Since the GFC, bank creditors appear to expect much larger losses in the event that a GSIB approaches insolvency. In this sense, we estimate a decline of “too big to fail.” | en |
| dc.description.sponsorship | Duffie is a research fellow of the National Bureau of Economic Research. Between October 2008 and April 2018, Duffie was on the board of directors of Moody\u2019s Corporation, which supplied some of the data used in this work. We thank the editor and anonymous referees for valuable comments and suggestions. We benefited from discussions by Emilio Bisetti, Max Croce, Adrien d\u2019Avernas, Marcel Fischer, Robin Greenwood, Rainer Haselman, Hanno Lustig, Deniz Okat and Gustavo Schwenkler; and from comments by participants at the World Congress of the Econometrics Society, WFA, EFA, CICF, SFS Cavalcade (North America, Asia-Pacific), UBC Winter Finance Conference, Dolomites Winter Finance Conference, seventh Conference on Fixed Income Markets, German Finance Association, Asian Bureau of Finance and Economic Research, FDIC JSFR Conference, UNSW Asset Pricing workshop, and the Global Economy and Financial Stability Conference, as well as seminar participants at the Virtual Finance Workshop, European Central Bank (DG-MF) and Bank of Canada, among others. We are also grateful for research assistance by Yilin Yang, and thank Jennie Bai, Robert Goldstein and Fan Yang for sharing their Laplace inversion code. Parts of the computing for this project was performed on the Sherlock cluster. We would like to thank Stanford University and the Stanford Research Computing Center for providing computational resources and support that have contributed to these research results. | en |
| dc.description.status | Peer-reviewed | en |
| dc.format.extent | 30 | en |
| dc.identifier.issn | 0002-8282 | en |
| dc.identifier.other | ORCID:/0000-0002-4436-2885/work/184100828 | en |
| dc.identifier.scopus | 86000582143 | en |
| dc.identifier.uri | http://www.scopus.com/inward/record.url?scp=86000582143&partnerID=8YFLogxK | en |
| dc.identifier.uri | https://hdl.handle.net/1885/733752238 | |
| dc.language.iso | en | en |
| dc.rights | © 2025 The Author(s) | en |
| dc.source | American Economic Review | en |
| dc.title | The Decline of Too Big to Fail | en |
| dc.type | Journal article | en |
| dspace.entity.type | Publication | en |
| local.bibliographicCitation.lastpage | 974 | en |
| local.bibliographicCitation.startpage | 945 | en |
| local.contributor.affiliation | Berndt, Antje; Research School of Finance, Actuarial Studies and Statistics, Research School of Finance, Actuarial Studies & Statistics, ANU College of Business & Economics, The Australian National University | en |
| local.contributor.affiliation | Duffie, Darrell; Stanford University | en |
| local.contributor.affiliation | Zhu, Yichao; Research School of Finance, Actuarial Studies and Statistics, Research School of Finance, Actuarial Studies & Statistics, ANU College of Business & Economics, The Australian National University | en |
| local.identifier.citationvolume | 115 | en |
| local.identifier.doi | 10.1257/aer.20220846 | en |
| local.identifier.pure | fb1d8c5f-03e9-49c2-9ea2-caefc4e9c307 | en |
| local.identifier.url | https://www.scopus.com/pages/publications/86000582143 | en |
| local.type.status | Published | en |