This paper contributes to the debate on the adequate regulatory treatment of non-bank financial intermediation (NBFI). It proposes an avenue for regulators to keep regulatory arbitrage under control and preserve sufficient space for efficient financial innovation at the same time. We argue for a...

An important question in banking is how strict supervision affects bank lending and in turn local business activity. Supervisors forcing banks to recognize losses could choke off lending and amplify local economic woes. But stricter supervision could also change how banks assess and manage...

In this paper, we investigate the design and implementation of financial regulation where market failures are created by asymmetric information between investors and firms. We argue that reputation, while providing some correction for imperfect information, should be supplemented by financial...

We examine the validity of a macroeconomic version of the Modigliani-Miller theorem. For this purpose, we develop a general equilibrium model with two production sectors, risk-averse households and financial intermediation by banks. Banks are funded by deposits and (outside) equity and monitor...

We develop a model in which two profit maximizing exchanges compete for IPO listings. They choose the listing fees paid by firms wishing to go public and control the trading costs incurred by investors. All firms prefer lower costs, however firms differ in how they value a decrease in trading...

We re-examine the economic justification for the regulation of firms' spatial price policies. Existing analysis, by treating market structure as exogenous, loses an important trade-off. Discriminatory pricing is more competitive between incumbents but acts as a strong deterrent against entry....

In many markets governments set minimum quality standards while some sellers choose to compete on the basis of quality by exceeding them. Such ‘high-quality’ strategies often win public acclaim, especially when ‘environmental friendliness’ is the dimension along which firms are...

This paper shows that an advertising ban is more likely to increase – rather than decrease – total consumption when advertising does not bring about a large expansion of market demand at given prices and when it increases product differentiation (thus allowing firms to command higher...

On May 9, 2010 euro zone countries announced the creation of the European Financial Stability Facility as a response to the sovereign debt crisis. This paper investigates the impact of this announcement on bank share prices, bank CDS spreads and sovereign CDS spreads. The main private...

We analyze the interaction between financial institutions' internal compensation policy, the quality of loans, and their securitization decision. We also assess the case for requiring financial institutions to defer bonus pay so as to make incentives more commensurate with the longer-term risk...