This paper examines the evolving importance of banks and securities markets during the process of economic development. We find that as countries develop economically, (1) the size of both banks and securities markets increases relative to the size of the economy, (2) the association between an...

Over the last three decades there has been a dramatic increase in the size of the financial sector and in the compensation of financial executives. This increase has been associated with greater risk-taking and the use of more complex financial instruments. Parallel to this trend, the...

This paper creates a new database that covers all banks in the United States in the census years between 1870 and 1900 to test the interaction between inequality and financial development when the banking system was starting over from scratch. A fixed-effects panel regression shows that the...

We study risk management in financial institutions using data on hedging of interest rate and foreign exchange risk. We find strong evidence that institutions with higher net worth hedge more, controlling for risk exposures, both across institutions and within institutions over time. For...

This paper studies the economic role of financial institutions in economies where agents' incomes are subject to privately observable, idiosyncratic random events. The information structure precludes conventional insurance arrangements. However, a financial institution -- perhaps best viewed as...

New security designs, improvements in computer telecommunications technology and advances in the theory of finance have led to revolutionary changes in the structure of financial markets and institutions. This paper provides a functional perspective on the dynamics of institutional change and...