Remuneration systems in the banking industry, in particular bonus payments, have frequently been blamed for contributing to the buildup of risks leading to the recent financial crisis. In our model, banks compete for managerial talent that is private information. Competition for talent sets...

This paper examines why unsolicited ratings tend to be lower than solicited ratings. Both self-selection among issuers and strategic conservatism of rating agencies may be reasonable explanations. Analyses of default incidences of non-U.S. borrowers between January 1996 and December 2006 show...