Abstract
This paper investigates capital, risk and liquidity decisions of the U.S. commercial banks during the period from 2001 till 2009. We extend the simultaneous equation model with partial adjustment introduced by Shrieves and Dahl (1992) and examine a relationship between bank liquidity, capital and risk adjustments in the presence of securitization.
Our research empirically verifies the theoretical predictions of Repullo (2005). Our results indicate that banks simultaneously coordinate short-term adjustments in capital, risk and liquidity.