Following Diamond (1997) and Fecht (2004) we use a model in which financial market access of households restrains the efficiency of the liquidity insurance that banks' deposit contracts provide to households that are subject to idiosyncratic liquidity shocks. But in contrast to these approaches...

Dominant investors can influence the publicly available information about firms by affecting the cost of information collection. Under strategic competition, transparency results in higher variability of profits and output. Thus lenders prefer less transparency, since this protects firms when in...

This paper integrates the problem of designing corporate bankruptcy rules into a theory of optimal debt structure. We show that, in an incomplete-contracts framework with imperfect renegotiation, having multiple creditors increases a firm's debt capacity while increasing its incentives to...

Legislation affects corporate governance and the return to human and financial capital. We allow the preference of a political majority to determine both the governance structure and the extent of labor rents. In a society where median voters have relatively more at stake in the form of human...