macroeconomic risk, investors reduce direct investment and hold more bank deposits. This ‘flight to quality’ leaves banks flush with … liquidity. Inside banks, given lack of observability of effort, loan officers (or risk takers) are compensated based on the … volume of loans but are penalized if banks suffer a high enough liquidity shortfall. Outside banks, when there is heightened …

Banks' leverage choices represent a delicate balancing act. Credit discipline argues for more leverage, while balance …, but also create perverse incentives for banks to engage in correlated asset choices and to hold little equity capital. As … a way to cope with these distorted incentives, we outline a two-tier capital framework for banks. The first tier is a …

suggest that improving bank access to branching affects the sectoral specialization (or diversification) of output, in a …We document that the deregulation of bank branching restrictions in the United States triggered a reallocation across …