Financial innovation has increased opportunities for diversification and lowered investment costs, but has not reduced the relative cost of active (informed) investment strategies compared with passive (less informed) strategies. What are the consequences? I have studied an economy with linear...

Italy's economic and banking systems have been under stress in the wake of the global financial crisis and the euro crisis. Our results suggest that firms in business groups have been more likely to survive in this challenging environment than unaffiliated firms. Better performance stems from...

The literature on debt restructuring usually assumes that banks behave in a uniform way towards firms in distress. Using a recent survey of Italian banks, we show that banks follow different strategies when they decide whether to take part in the workout process, in that some of them do...

High concentration of creditors can have two beneficial effects on borrowers: by enhancing lenders' ability to monitor, it can reduce the likelihood of financial distress; by reducing coordination failure among creditors, it can help a distressed firm to avoid bankruptcy. However, a strong...

When the debt of distressed firms is dispersed, free riding makes it difficult to reach a restructuring agreement. We develop a multistage game in which banks come across each other frequently, allowing them to threaten punishment in case of free riding. As the number of banks grows, the chance...

Exploiting the timing of the 2005-06 Italian bankruptcy law reforms, we disentangle the effects of reorganization and liquidation in bankruptcy on bank financing and firms' investment. A 2005 reform introduces procedures facilitating loan renegotiation. The 2006 reform subsequently strengthens...

This paper analyses empirically the effect of judicial efficiency on bank credit contractual terms for the universe of Italian corporations borrowing from the banking sector. Exploiting within-country variation in the length of bankruptcy proceedings across different jurisdictions, the paper...

This paper explores the implications of systemic risk in Credit Structured Finance (CSF). Risk measurement issues loomed large during the 2007-08 financial crisis, as the massive, unprecedented number of downgrades of AAA senior bond tranches inflicted severe losses on banks, calling into...

This paper explores the implications of systemic risk in Credit Structured Finance (CSF). Risk measurement issues loomed large during the 2007-08 financial crisis, as the massive, unprecedented number of downgrades of AAA senior bond tranches inflicted severe losses on banks, calling into...

This paper looks into the sovereign credit default swap (CDS) market from two perspectives. First, it analyses the relation between CDS and bond spreads. The results on a single-entity basis suggest that the CDS market leads the bond market in price discovery, especially during 2010, while both...