We analyze asset-backed commercial paper conduits, which experienced a shadow-banking run and played a central role in the early phase of the financial crisis of 2007–2009. We document that commercial banks set up conduits to securitize assets worth $1.3 trillion while insuring the newly...

This paper investigates the relation between corporate political connections and government investment. We study various forms of political influence, ranging from passive connections between firms and politicians, such as those based on politicians’ voting districts, to active forms, such as...

This paper empirically examines how capital affects a bank’s performance (survival and market share) and how this effect varies across banking crises, market crises, and normal times that occurred in the US over the past quarter century. We have two main results. First, capital helps small...

Though overall bank performance from July 2007 to December 2008 was the worst since the Great Depression, there is significant variation in the cross-section of stock returns of large banks across the world during that period. We use this variation to evaluate the importance of factors that have...

Using novel data on bank applications to the Troubled Asset Relief Program (TARP), we study the effect of government assistance on bank risk taking. Bailed-out banks initiate riskier loans and shift assets toward riskier securities after receiving government support. However, this shift in risk...

We show that eurozone bank risks during 2007–2013 can be understood as carry trade behavior. Bank equity returns load positively on peripheral (Greece, Italy, Ireland, Portugal, Spain, or GIIPS) bond returns and negatively on German government bond returns, which generated carry until the...

We present a standard model of financial innovation, in which intermediaries engineer securities with cash flows that investors seek, but modify two assumptions. First, investors (and possibly intermediaries) neglect certain unlikely risks. Second, investors demand securities with safe cash...

How do markets for debt cash flow rights, with and without accompanying control rights, affect the efficiency of lending? A bank makes a loan, learns if it needs monitoring, and then decides whether to lay off credit risk. The bank can transfer credit risk by either selling the loan or buying a...

This paper provides the first empirical evidence that bank regulation is associated with cross-border spillover effects through the lending activities of large multinational banks. We analyze business lending by 155 banks to 9,613 firms in 1,976 different localities across 16 countries. We find...

We investigate whether excess control rights of ultimate owners in pyramids affect banks׳ capital ratio adjustments. When control and cash flow rights are identical, to boost capital ratios banks issue equity without cutting lending. However, when control rights exceed cash flow rights, instead...