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...

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...

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...

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...

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. We focus on developments in banks'...

Although it is widely acknowledged that the benefits of corporate governance reform could be substantial, systematic evidence on such reforms is scant.We both document and evaluate a contemporary corporate governance reform by constructing 18 measures of shareholder and creditor protection for...

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 hazard...

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.

In the market for payment media, some consumers use only one medium when paying for their point-of-sale transactions, while others multihome and use many.As this pattern reflects the diffusion of new payment media, we take a look at the determinants of the adoption of new payment media through...