{'fraction_non_alphanumeric': 0.021705426356589147, 'fraction_numerical': 0.015503875968992248, 'mean_word_length': 4.666666666666667, 'pattern_counts': {'":': 0, '<': 0, '<?xml version=': 0, '>': 0, 'https://': 0, 'lorem ipsum': 0, 'www.': 0, 'xml': 0}, 'pii_count': 0, 'substrings_counts': 0, 'word_list_counts': {'cursed_substrings.json': 0, 'profanity_word_list.json': 0, 'sexual_word_list.json': 0, 'zh_pornsignals.json': 0}}
What Explains the Difference in Leverage between Banks and Nonbanks?

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.