Franchise Value, Equity Financing and Macro-prudential Management

Since Lehman Brothers filed for bankruptcy protection in September, 2008, global financial crisis broke out. The important lesson was that neglect of macro-prudential management could result in excessive money corporation leverage of financial institutions. This paper, from the perspectives of franchise value, Bail-in and Cocos, explains the necessity of financial institutions raising the proportion of equity financing, and proposes policy suggestions of improving macro-prudential management to restrain the magnification of the leverage of financial institutions