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Perotti, Enrico; Matta, Rafael - 2015

Does demand for safety create instability ? Secured (repo) funding can be made so safe that it never runs, but shifts risk to unsecured creditors. We show that this triggers more frequent runs by unsecured creditors, even in the absence of fundamental risk. This effect is separate from the...

Persistent link: https://www.econbiz.de/10011288387

Investor Protection and Entry

Perotti, Enrico; Volpin, Paolo - 2007

Entry requires external finance, especially for less wealthy entrepreneurs, so poor investor protection limits competition. We model how incumbents lobby harder to block access to finance to entrants when politicians are less accountable to voters. In a broad cross-section of countries and...

Persistent link: https://www.econbiz.de/10010325184

Lobbying on Entry

Perotti, Enrico; Volpin, Paolo - 2004

We develop a model of endogenous lobby formation in which wealth inequalityand political accountability undermine entry and financial development. In-cumbents seek a low level of effective investor protection to prevent potentialentrants from raising capital. They succeed because they can...

Persistent link: https://www.econbiz.de/10010325212

The Political Economy of Financial Fragility

Feijen, Erik; Perotti, Enrico - 2005

While financial liberalization has in general favorable effects, reforms in countries with poor regulation is often followed by financial crises. We explain this variation as the outcome of lobbying interests capturing the reform process. Even after liberalization, market investors must rely on...

Persistent link: https://www.econbiz.de/10010325325

Bank Ownership and Financial Stability

Perotti, Enrico; Vorage, Marcel - 2010

We study a politician's choice for state or private control of banks. The choice trades of lobbying contributions … maximize their rents. As state banks are less efficient, at higher level of accountability there is a shift to private control …. At the transition point there is a jumpin risk taking, as private banks do not internalize the social costs of bank …

Persistent link: https://www.econbiz.de/10010325737

The Political Economy of Financial Systems

Haber, Stephen; Perotti, Enrico - 2008

This survey reviews the literature on the political economy of financial structure, broadly defined to include the size of capital markets and banking systems as well as the distribution of access to external finance across firms.The theoretical literature on the institutional basis for...

Persistent link: https://www.econbiz.de/10010325760

A Pigovian Approach to Liquidity Regulation

Perotti, Enrico; Suarez, Javier - 2011

incentives for risk creation.When banks differ in credit opportunities, a Pigovian tax on short-term funding is efficient in … credit incentives are strongest.When banks differ instead mostly in gambling incentives (due to low charter valueor …

Persistent link: https://www.econbiz.de/10010325833

The Political Economy of Finance

Perotti, Enrico - 2013

This survey reviews how a recent political economy literature helps explaining variation in governance, competition, funding composition and access to credit. Evolution in political institutions can account for financial evolution, and appear critical to explain rapid changes in financial...

Persistent link: https://www.econbiz.de/10010326229

Convertible Bonds and Bank Risk-Taking

Martynova, Natalya; Perotti, Enrico - 2012

We study the effect of going-concern contingent capital on bank risk choice. The possibility of debt for equity conversion forces deleveraging in highly levered states, when risk incentives are worse. The additional equity reduces endogenous risk shifting by diluting returns in high states. An...

Persistent link: https://www.econbiz.de/10010326507

Liquidity Runs

Matta, Rafael; Perotti, Enrico - 2016

Can the risk of losses upon premature liquidation produce bank runs? We show how a unique run equilibrium driven by asset liquidity risk arises even under minimal fundamental risk. To study the role of illiquidity we introduce realistic norms on bank default, such that mandatory stay is...

Persistent link: https://www.econbiz.de/10011586702