We examine the interaction between three kinds of concentrated owners commonly found in an emerging market: family-run business groups, domestic financial institutions, and foreign financial institutions. Using data from India in the early 1990s, we find evidence that domestic international...

Reaching-for-yield--investors' propensity to buy riskier assets in order to achieve higher yields--is believed to be an important factor contributing to the credit cycle. This paper presents a detailed study of this phenomenon in the corporate bond market. We show that insurance companies, the...

We consider a model of liquidity demand arising from a possible maturity mismatch between asset revenues and consumption. This liquidity demand can be met with either cash reserves (inside liquidity) or via asset sales for cash (outside liquidity). The question we address is, what determines the...

The spectacular failure of top-rated structured finance products has brought renewed attention to the conflicts of interest of Credit Rating Agencies (CRAs). We model both the CRA conflict of understating credit risk to attract more business, and the issuer conflict of purchasing only the most...

I consider banks' role in providing funding liquidity (the ability to raise cash on demand) and market liquidity (the ability to trade assets at low cost), and how these roles have evolved. Traditional banks made illiquid loans funded with liquid deposits, thus producing funding liquidity on the...

How does technological progress in financial intermediation affect the economy? To address this question a costly-state verification framework is embedded into a standard growth model. In particular, financial intermediaries can invest resources to monitor the returns earned by firms. The...

Recent work suggests that financial development is important for economic growth, since financial markets more effectively allocate capital to firms with high value projects. For firms in poorly developed financial markets, implicit borrowing in the form of trade credit may provide an...

This paper explores the behavior of the U.S. economy during the interwar period from the perspective of a model in which the existence of non-convexities in the intermediation process gives rise to a multiplicity of equilibria. The resulting indeterminancy is resolved through a sunspot process...

The history of the financing of the American corporation can be described along many dimensions. One dimension of that history that underlies various measures of historical change in corporate finance is the range of feasible relationships between corporations and intermediaries. Intermediaries...

This paper makes three points regarding the proper measurement of the output of financial intermediaries. Two of them concern the measurement of nominal financial output, especially banking output. First, we show that, to impute the nominal value of implicitly priced financial output, it is...