We find that countries which are able to borrow at spreads that seem low given fundamentals (for example because investors take a bullish view on a country's future), are more likely to develop economic difficulties later on. We obtain this result through a two-stage procedure, where a first...

Panel data on Ghanaian manufacturing firms are used to test predictions from models of irreversible investment under uncertainty. Information on the entrepreneur’s subjective probability distribution over future demand for the firm’s products is used to construct the expected variance of...

There is increasing emphasis on the importance of efficient financial markets for sustained real investment and economic growth, yet limited empirical research on the effects of the deregulation of financial markets on the firm''s investment decisions. The purpose of this paper is to model the...

This paper shows that the behavior of entrepreneurs facing incomplete financial markets and risky investment can explain why growth accelerations in developing countries tend to be associated with current account improvements. The uninsurable risk of losing invested capital forces entrepreneurs...

This paper explains the continuing success of European cooperative banks through evolving comparative advantages. It points out that a cooperative is built around an intergenerational endowment without final owners, which creates particular governance challenges. Risks include the use of the...