Among growing concerns about potential financial stability risks posed by the asset management industry, herding has been considered as an important risk amplification channel. In this paper, we examine the extent to which institutional investors herd in their trading of U.S. corporate bonds and...

Bilateral financial contracts typically require an assessment of counterparty risk. Central clearing of these financial contracts allows market participants to mutualize their counterparty risk, but this insurance may weaken incentives to acquire and to reveal information about such risk. When...

This paper adopts a mechanism design approach to study optimal clearing arrangements for bilateral financial contracts in which an assessment of counterparty risk is crucial for efficiency. The economy is populated by two types of agents: a borrower and lender. The borrower is subject to limited...

I compare the timing of information acquisition among institutional investors and sell-side analysts, and I show that hedge fund trades predict the direction of subsequent analyst ratings change reports while other investors' trades do not. In addition, hedge funds reverse trades after analyst...

This paper examines the relationship between multimarket bank presence and the profitability (and therefore viability) of small, single-market banks. We find that increased presence of multimarket banks is associated with a significant reduction in the profitability of small, single-market banks...

This paper argues that changes in the propagation of idiosyncratic shocks along firm networks are important to understanding variations in asset returns. When calibrated to match key features of supplier-customer networks in the United States, an equilibrium model in which investors have...

In this paper, we examine the role of market characteristics in explaining the much discussed phenomenon of growth in the number of banking institution branches over time, and the much less discussed phenomenon of decline in the size of the average branch. We note first that substitution of bank...

Theory predicts that "common ownership" (ownership of rivals by a common shareholder) can be anticompetitive because it reduces the weight firms place on their own profits and shifts weight toward rival firms held by common shareholders. In this paper we use accounting data from the banking...

If managers maximize the payoffs of their shareholders rather than firm profits, then it may be anticompetitive for a shareholder to own competing firms. This is because a manager?s objective function may place weight on profits of competitors who are held by the same shareholder. Recent...

This paper explores the relationship between the health of the financial sector and the rest of the economy. We develop an indicator of financial sector health using a distance-to-default measure based on a Merton-style option pricing model. Our measure spans over three decades and appears to...