Consolidation in the banking industry has sparked concern about the survival of small banks. However, if small banks are better at processing credit information than large banks, they should continue to survive in a competitive environment. We evaluate risk-adjusted commercial loan yields (gross...

Deposit insurance is a put option that encourages excessive risk taking by banks. Excess litigation against a bank, a form of operational risk, is one indicator of risk because litigation often reflects a failure to maintain a strong system of internal control. We analyze five different measures...

Excessive (substantially above peer) litigation against a bank is indicative of operational risk because it often suggests failure to maintain a strong system of internal control. We examine the relation between bank performance and weak internal control using legal expense as a proxy. We find...

Directors help determine the strategic direction of a corporation and are responsible for ensuring the institution has a good system of internal control. Banking institutions without a strategic direction emphasizing sound lending practices that promote the long-run financial health and...

What happens when valuable loan relationships are destroyed through a bank's actions? This paper summarizes financial theory and empirical studies related to the case law on lender liability, focusing particularly on breach of contract. Lender liability reflects asymmetric information, market...

Low spreads between loan rates and deposit rates are indicative of a more efficient financial system. We argue that spreads are better cross country measures of banking system efficiency than the net interest margins used in previous studies. We present theoretical and empirical evidence that...

Litigation against the largest subprime mortgage servicer in the US provides lessons about the appropriate regulation of mortgage servicing and adds to research about the causes of the financial crisis. Mortgage servicing is essential to the functioning of the financial system so servicers must...

Pivotal litigation against the largest subprime mortgage servicer in the US provides lessons about the appropriate regulation of mortgage servicing and adds to research about the causes of the financial crisis. Mortgage servicing is essential to the functioning of the financial system so...

Lawsuits have a deterrent effect, but this is mitigated if settlements are routine. Regulators and judges should consider that a firm contemplating predatory activity directed at financially unsophisticated individuals might have built an estimate of settlement costs into their analysis of the...

Profit efficiency is closely related to value creation, and researchers have found noninterest income to be a major determinant of profit efficiency. But DeYoung and Rice suggest that some banks have an excessive reliance on NII, pointing out that 1% of banks generate 18% of fee income, and that...