Showing 1 - 10 of 126
Abstract: The financial crisis has been attributed partly to perverse incentives for traders at banks and has led policy makers to propose regulation of banks’ remuneration packages. We explain why poor incentives for traders cannot be fully resolved by only regulating the bank’s top...
Persistent link: https://www.econbiz.de/10011091254
Abstract: This paper documents large cross-country variation in the relationship between bank competition and bank stability and explores market, regulatory and institutional features that can explain this variation. We show that an increase in competition will have a larger impact on banks’...
Persistent link: https://www.econbiz.de/10011090475
This paper studies the impact of explicit deposit insurance on market discipline in a framework that resembles a natural experiment.We improve upon previous studies by exploiting a unique combination of country-specific circumstances, design features, and data availability that allows us to...
Persistent link: https://www.econbiz.de/10011091945
Collateral is one of the most important features of a debt contract. A substantial theoretical literature motivates the … use of collateral as a means to alleviate ex-ante and ex-post information asymmetries between borrowers and lenders and … the incidence of credit rationing. Through its seniority effect, collateral may also affect banks’ incentives to monitor …
Persistent link: https://www.econbiz.de/10011090503
empirical relation between collateral and loan risk. We posit that certain economic characteristics of collateral may be … associated with the empirical dominance of different risk-collateral channels implied by economic theory, namely the “lender … predictions regarding the empirical relations between collateral and loan risk. For our sample of commercial loans, we find that …
Persistent link: https://www.econbiz.de/10011090718
Collateral is a widely used, but not well understood, debt contracting feature. Two broad strands of theoretical … literature explain collateral as arising from the existence of either ex ante private information or ex post incentive problems … ex post theories of collateral are empirically dominant, although the ex ante theories are also valid for customers with …
Persistent link: https://www.econbiz.de/10011092269
We look at the implications of uncertain monetary policy preferences for the targeting and contracting approach to monetary stability. It turns out that in presence of uncertain preferences a linear incentive contract in the sense of Walsh (1995) performs better in terms of social welfare than...
Persistent link: https://www.econbiz.de/10011090529
This paper characterizes an optimal group loan contract with costly peer monitoring. Using a fairly standard moral hazard framework, we show that the optimal group lending contract could exhibit a joint-liability scheme. However, optimality of joint-liability requires the involvement of a group...
Persistent link: https://www.econbiz.de/10011099372
We study credit ratings on subprime and Alt-A mortgage-backed securities (MBS) deals issued between 2001 and 2007, the period leading up to the subprime crisis. The fraction of highly-rated securities in each deal is decreasing in mortgage credit risk (measured either ex-ante or ex-post),...
Persistent link: https://www.econbiz.de/10011090320
How do banks react to increased interbank competition?Recent banking theory offers conflicting predictions about the impact of competition on bank orientation í L H WKH choice of relationship based versus transactional banking í DQG EDQN LQGXVWU\ specialization.We empirically investigate the...
Persistent link: https://www.econbiz.de/10011090384