-and-repurchase (repo) contracts. Exemption from an automatic stay in bankruptcy enables financial intermediaries to raise greater liquidity … underlying the contracts. When exempt from bankruptcy, creditors of highly leveraged financial intermediaries respond to such … bankruptcy, can be not only ex-post optimal, but also ex-ante optimal, especially for illiquid collateral with high exposure to …

rule limits arbitrage opportunities by restricting associated interest expense deductions. Prior to 1986, U.S. banks were … not subject to the interest deduction limitation, making banks preferred holders of tax-exempt debt. U.S. banks used tax … early 1980s. Despite their special exemption, and in part because of their widespread holdings, banks did not benefit from …

banks may default because of fundamental or self-fulfilling runs. With only fundamental defaults, we show that the … competitive equilibrium is constrained efficient. However, when banks are vulnerable to runs, banks' leverage decisions are not ex …-ante optimal: individual banks do not internalize that higher leverage makes other banks more vulnerable. The theory calls for …

In an RCT with US small businesses, we document that a large share of firms are not well-informed about bankruptcy …. Many assume that bankruptcy necessarily entails the death of a business and do not know about Chapter 11 bankruptcy, where … reform that lowered the costs of bankruptcy procedures to enhance their protection. In addition, they exhibit substantial …

. The bankruptcy and liquidation of a retail chain weakens the economies of agglomeration in any given local area, reducing …

and failure of tens of thousands of firms and thousands of banks. This essay uses new data and methods to identify causal … links between failures of banks and bankruptcies of firms. Our analysis indicates that bank failures triggered bankruptcies … of firms that depended upon banks for ongoing access to commercial credit. Firms that did not depend upon banks for …