Do bond investors demand credit quality or liquidity? The answer is both, but at different times and for different reasons. Using data on the Euro-area government bond market, which features a unique negative correlation between credit quality and liquidity across countries, we show that the...

We use payroll data on 1.2 million bank employee years in the Austrian, German, and Swiss banking sector to identify incentive pay in the critical banking segments of treasury/capital market management and investment banking for 66 banks. We document an economically significant correlation of...

This paper derives indicators of the severity and structure of banking system risk from asymptotic interdependencies between banks' equity prices. We use new tools available from multivariate extreme value theory to estimate individual banks' exposure to each other ("contagion risk") and to...

This paper is a comparative study of the responses to the 1995 Wharton School survey of derivative usage among US non-financial firms and a 1997 companion survey on German non-financial firms. It is not a mere comparison of the results of both studies, but a comparative study, drawing a...

There is an active global debate on corporate governance. A few years ago, there was serious concern about whether US companies would be able to compete against the powerful corporate groupings supported by closely involved banks in the Far East. Now, following the collapse of the East Asian...

This paper introduces the topic of Europe's changing financial landscape and highlights the findings of the contributions to this volume of the EIB Papers. Key points emerging from this overview include: (i) a variety of factors are reshaping Europe's finance, notably the Single Market, EMU,...

The 1992 "Single Market" failed to create a real single market for financial services across Europe. However, the boom in bond issuance (stimulated by EMU) and the coincidental equity issuance boom have both led to dramatic changes in the infrastructure of financial markets. So, the EU is well...

The launch of the euro proved to be extraordinarily smooth - auguring well for its future. If the EU can build on this initial success, then citizens - from anywhere in the world - should come to recognise the euro as a robust 'store of value' for their savings. That should complete the...

With the successful launch of the euro, the previously national interbank bank markets have been integrated at once in a unified euro interbank market, outstanding public debt has been redenominated in euro, trading conventions harmonised, and all EMU stock markets have started quoting in euro....

The process that so many people are envisaging for EU capital markets may be summarised approximately as follows: The single currency will eliminate currency risk. This will encourage a diversification by investors based upon other risk considerations. This will lead to a tremendous growth in...