We develop a model of banking competition for deposits based on modern financial intermediation theory and industrial organization analysis. The standard demand deposit contract makes banks vulnerable to failure and introduces (endogenous) expectations-based vertical differentiation. A...

Suppose that information about the value of a risky asset is dispersed among many agents in the economy. The paper studies the rate at which successive price quotations from competitive market makers, which reflect the desired (notional) trades of risk- averse informed agents, reveal the value...

We construct a dynamic competitive model with futures markets where price volatility comes from information arrival and noise trading. In this model, we address three issues: What does informational efficiency mean in a multi-period setting? How do information arrival and noise trading interact...

This paper examines the development of the main bank system in Japan. The pre-war system of corporate financing in Japan was very different from the main bank system in the post-war period. By the end of World War II, the transformation of corporate finance, which is characterized by a...

This paper describes a theory of how borrowers with private information about their future credit prospects choose seniority and maturity of bank loans and publicly issued bonds. The model implies that short-term bank loans will be senior to public long- term debt. With sufficient public debt,...

The paper models the relative prices of shares that differ only in their voting rights. The voting premium is derived as a function of the probability of takeover. We analyse how the voting premium is determined by the relative efficiency of the rival, the share structure, and by ownership...

We study the problem of financial contracting between a firm and outside investors when the firm cannot commit to future payouts, but assets can be contracted upon. By analyzing the renegotiation between firm and investors in default, we show that a capital structure with multiple investors...

The paper estimates the gains from takeover in a sample of Swedish public- tender offers and analyses its division between target and bidder shareholders. It finds that target and bidder shareholders collectively gain 6% in merger bids and 3% in minority buyouts, and that target shareholders...

When a firm is close to bankrupcy, equity-holders may `blackmail' owners of bonds by paying less than the originally-contracted coupon payments. This paper develops simple, closed-form expressions for bond and equity values when such blackmail effects are present. Furthermore, we show that...

One of the main decisions facing firms is that of a choice of a capital structure, and in particular the choice of debt versus equity. Models where capital structure matters have focused either on the incentive approach, where agency problems stemming from the separation between ownership and...