This essay shows that government credit-allocation schemes generate incentive conflicts that undermine the quality of bank supervision and eventually produce banking crisis. For political reasons, most countries establish a regulatory culture that embraces three economically contradictory...

This paper supplies an agency-cost and contestable-markets perspective on the financial policies that triggered the Asian financial crisis. The agency-cost analysis hypothesizes that individual-country regulators knew that politically directed loans had made their banks insolvent, but...

This paper tests the optimal-contracting hypothesis, drawing upon data from a natural experiment that ended during the Great Depression. The subjects of our experiment are bank stockholders. The experimental manipulation concerns the imposition of state or federal restrictions on the contracts...