This paper investigates whether privatization in emerging economies has a significant indirect effect on local stock market development through the resolution of political risk. We argue that a sustained privatization program represents a major political test that gradually resolves uncertainty...

The 1997 collapse of the Albanian economy caused by the collapse of economy-wide Ponzi schemes contrasts sharply to its success status as a post-socialist transition country in the years 1992-1996. In this paper, an attempt is made to explain this 'Albanian Paradox'. The specific Albanian...

Most stock exchange regulators around the world reacted to the 2007-2009 crisis by

While financial liberalization has in general favorable effects, reforms in countries with poor regulation is often followed by financial crises. We explain this variation as the outcome of lobbying interests capturing the reform process. Even after liberalization, market investors must rely on...

Entry requires external finance, especially for less wealthy entrepreneurs, so poor investor protection limits competition. We model how incumbents lobby harder to block access to finance to entrants when politicians are less accountable to voters. In a broad cross-section of countries and...

We study the dependence between the downside risk of European banks and insurers. Since the downside risk of banks and insurers differs, an interesting question from a supervisory point of view is the risk reduction that derives from diversification within large banks and financial...

We develop a model of endogenous lobby formation in which wealth inequality and political accountability undermine entry and financial development. In- cumbents seek a low level of effective investor protection to prevent potential entrants from raising capital. They succeed because they can...

This survey reviews the literature on the political economy of financial structure, broadly defined to include the size of capital markets and banking systems as well as the distribution of access to external finance across firms. The theoretical literature on the institutional basis for...

We allow the preference of a political majority to determine both the corporate governance structure and the division of profits between human and financial capital. In a democratic society where financial wealth is concentrated, a political majority may prefer to restrain governance by...

This paper discusses liquidity regulation when short-term funding enables credit growth but generates negative systemic risk externalities. It focuses on the relative