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Efficient Bailouts?
Bianchi, Javier - 2012
We develop a quantitative equilibrium model of financial crises to assess the interaction between ex-post interventions in credit markets and the buildup of risk ex ante. During a systemic crisis, bailouts relax balance sheet constraints and mitigate the severity of the recession. Ex ante, the...
Persistent link: https://www.econbiz.de/10012460074
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The History and Economics of Safe Assets
Gorton, Gary B. - 2016
-produced short-term safe assets--bank debt, are subject to runs and this has important implications for macroeconomics and for …
Persistent link: https://www.econbiz.de/10012456465
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Corporate Control, Portfolio Choice, and the Decline of Banking
Gorton, Gary - 1992
eroded the profitability of banks' traditional activities. Bank failures, insignificant from 1934, the date the Glass … centers on fixed-rate deposit insurance: the insurance gives bank shareholders an incentive to take on risk when the value of … bank charters falls. We propose and test an alternative explanation based on corporate control considerations. We show that …
Persistent link: https://www.econbiz.de/10012474716
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Liquidity, Efficiency and Bank Bailouts
Gorton, Gary - 2002
Why do governments bailout banking systems in distress? We argue that the government can efficiently provide liquidity. We present a general equilibrium model in which not all assets can be used to purchase all other assets at every date. At some dates agents want to sell projects or securities....
Persistent link: https://www.econbiz.de/10012469552
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Real Options in a Dynamic Agency Model, with Applications to Financial Development, IPOs, and Business Risk
Philippon, Thomas - 2007
We study investment options in a dynamic agency model. Moral hazard creates an option to wait and agency conflicts affect the timing of investment. The model sheds light, theoretically and quantitatively, on the evolution of firms' dynamics, in particular the decline of the failure rate and the...
Persistent link: https://www.econbiz.de/10012465063
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Contract Renegotiation in Agency Problems
Edlin, Aaron S. - 1997
This paper studies the ability of an agent and a principal to achieve the first-best outcome when the agent invests in an asset that has greater value if owned by the principal than by the agent. When contracts can be renegotiated, a well-known danger is that the principal can hold up the agent,...
Persistent link: https://www.econbiz.de/10012472728
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Subjective Performance Measures in Optimal Incentive Contracts
Baker, George - 1993
Objective measures of performance are seldom perfect. In response, incentive contracts often include important subjective components that mitigate incentive distortions caused by imperfect objective measures. This paper explores the combined use of subjective and objective performance measures...
Persistent link: https://www.econbiz.de/10012474466
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Misperceptions, Moral Hazard, and Incentives in Groups
Gaynor, Martin - 1987
Recent work has shown that, in the presence of moral hazard, balanced budget Nash equilibria in groups are not pareto-optimal. This work shows that when agents misperceive the effects of their actions on the joint outcome, there exist a set of sharing rules which balance the budget and lead to a...
Persistent link: https://www.econbiz.de/10012476839
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The Generalized Informativeness Principle
Chaigneau, Pierre - 2014
This paper shows that the informativeness principle, as originally formulated by Holmstrom (1979), does not hold if the first-order approach is invalid. We introduce a "generalized informativeness principle" that takes into account non-local incentive constraints and holds generically, even...
Persistent link: https://www.econbiz.de/10012457937
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Liquidity Risk, Liquidity Creation and Financial Fragility : A Theory of Banking
Diamond, Douglas W. - 1999
their investors. We show the bank has to have a fragile capital structure, subject to bank runs, in order to perform these … functions. Far from being an aberration to be regulated away, the funding of illiquid loans by a bank with volatile demand … such as narrow banking and bank capital requirements …
Persistent link: https://www.econbiz.de/10012471328