This paper examines the incentive structure underlying the current features of bank regulation, particularly the role of prompt corrective action, capital requirements and mandatory restrictions on asset choice as primary tools to control risk-shifting incentives of depository institutions. We...

This paper examines the incentive structure underlying the current features of bank regulation, particularly the role of prompt corrective action, capital requirements and mandatory restrictions on asset choice as primary tools to control risk-shifting incentives of depository institutions. We...

This paper surveys the empirical and theoretical literature on the mechanisms of corporate governance. We focus on the internat mechanisms of corporate governance (e.g., arising from conflicts of interests between managers and equityholders, equityholders and creditors, and capital contributors...

This paper examines the incentive structure underlying the current features of bank regulation. We show that capital regulation has limited effectiveness, given the observed high leverage ratios of banks. We propose instead a more direct and effective mechanism of influencing incentives through...

We characterize conditions under which a large institutional shareholder and the manager of a firm will establish relationship investing, wherein the manager actively cooperates with the institution in the monitoring process, to resolve agency problems. The setting of our model is that of a...

This paper investigates the design of privatization mechanisms in emerging market economies. We identify an emerging market economy by the political constraints that limit the set of viable privatization mechanisms. Our objective is to explain the striking diversity of privatization mechanisms...

This paper investigates the design of privatization mechanisms in emerging marketeconomies characterized by political constraints that limit the set of viable privatization mechanisms. Our objective is to explain the striking diversity of privatization mechanisms observed in practice and the...

We analyze the impact of option trading and margin rules on the behavior of informed traders and on the micro structure of stock and option markets. In the absence of binding margin requirements, the introduction of an options market causes informed traders to exhibit a relative trading bias...

Recent empirical work has documented the tendency of corporations to reset strike prices on previously-awarded executive stock option grants when declining stock prices have pushed these options out-of-the-money. This practice has been criticized as counter-productive since it weakens incentives...

In this paper we examine a model of the optimal financial claim for a bank in a world where a borrowing firm s uninformed stakeholders depend upon the bank for truthful information about the firm s evolving financial condition. In particular, stakeholders rely upon the bank to reveal whether the...