We show that the impact of government bailouts (liquidity injections) on a representative bank's risk taking depends on the level of systematic risk of its loans portfolio. In a model where bank's output follows a geometric Brownian motion and the government guarantees bank's liabilities, we...

This paper reviews the first thirty years of finance research and education in Finland, starting with publication of the first dissertation in finance in 1977. That was also the year when the first department of finance was established in Finland - among the first in the Nordic countries. This...

The paper shows that uninformed finance gives rise to excessive entry, both in human-capital-intensive and in conventional industries when the financial institutions cannot identify the entrepreneurial talent. Introduction of informed capital (eg venture capital finance) with superior screening...

The developed world exhibits substantial but poorly understood differences in the efficiency and quality of low-value payment services. This paper compares payments arrangements in the UK, Norway, Sweden, and Finland, and discusses the impact of network effects on incentives to adopt new...

Although beneficial allocational effects have been a central motivation for the Basel II capital adequacy reform, the interaction of these effects with Basel II's procyclical impact has been less discussed. In this paper, we investigate the effect of Basel II on the efficiency of bank lending....

The emergence of financial conglomerates and multinational financial institutions as well as the development of new financial products have raised concerns as to the ability of separate sectoral supervisors and different national authorities to effectively oversee financial markets....

Recently, banking literature has had a quest for appropriate pricing of bank loans under the new Basel II rules and has been in pursuit of possible outcomes for undertaking such credit risk. In this paper, we propose a simplified formula to price bank's corporate loans, aiming at making bank...

Extending a standard credit-risk model illustrates that a single factor can drive both expected losses and the extent to which they may be exceeded in extreme scenarios, ie “unexpected losses.” This leads us to develop a framework for forecasting these losses jointly. In an application to...

We study the impact of disclosure about bank fundamentals on depositors’ behavior in the presence (and absence) of economic linkages between financial institutions. Using a controlled laboratory environment, we identify under which conditions disclosure is conducive to bank stability. We find...

Securitization is considered to be one of the biggest financial innovations of the last century. It is also regarded as both a catalyst and solution to the 2008 financial crisis. Once a popular method of financing the mortgage and consumer credit markets, aspects of the global securitization...