Whether or not banks are engaged in ex ante monitoring of customers may have important consequences for the whole economy. We approach this question via a model in which banks can invest in either information acquisition or market power (product differentiation). The two alternatives generate...

This paper studies the welfare effects of R&D subsidies. We develop a model of continuous optimal treatment with outcome heterogeneity where the treatment outcome depends on applicant investment. The model takes into account heterogeneous application costs and identifies the treatment effect on...

We study a financial market adverse selection model where all agents are endowed with initial wealth and choose to invest as entrepreneurs or financiers, or not to invest. We show that often a lack of outside finance leads to the emergence of financial markets where availability of outside...

We extend the theoretical basis of the empirical literature on the effects of R&D subsidies by providing an estimable model of strategic interaction among subsidy applicants, and public and private sector R&D financiers. Our model incorporates fixed R&D costs and a cost of external finance. We...

We study the effects of investor protection on the availability of external finance, entrepreneurship, and creation of new firms in an equilibrium search model of private capital markets. In addition to search frictions, we examine contract frictions, specifically interim and ex post moral...

This paper uses entrepreneurs’survival expectations around the time of market entry and subsequent venture exits to study entrepreneurial optimism. Using data on a large number of nascent entrepreneurs in the US and start-ups in Finland, we find that new entrepreneurs survival beliefs are on...

This paper investigates the evolution of the (conditional) volatility of returns on three Scandinavian markets (Finland, Norway and Sweden) over the turbulent period of the past decade, namely the overlapping periods of financial liberalisation, drastically changing macroeconomic conditions and...

In this paper we discuss recent developments in the Finnish banking sector. Our specific aim is to examine whether and to what extent recent developments in Finland are broadly in line with the trends common to banking sectors in Europe and also worldwide. <p> We focus on developments in banks’...</p>

Transparency regulation aims at reducing financial fragility by strengthening market discipline. There are however two elementary properties of banking that may render such regulation inefficient at best and detrimental at worst. First, an extensive financial safety net may eliminate the...

The banking system is known to be vulnerable to self-fulfilling crises that are caused by depositors’ coordination failure. We show that transparency regulation may prevent certain types of systemic crises by eliminating the possibility of the coordination failure.