The Role of Agency Problems in the Demise of Silicon Valley Bank

Description:

In early March 2023, Silicon Valley Bank was captured by the regulator following a run on
the bank. To understand why the bank failed, we need to consider the economic background,
how accounting rules were applied, and managerial incentives. Linking them together, and
introducing the Israeli banking system, for comparison, the case provides a reasonable
explanation as to why this failure occurred, and how to reduce the likelihood of future failures.