Despite operating under substantial regulatory constraints, we find that commercial banks manage their investments largely consistent with the predictions of portfolio choice models with capital market imperfections. Based on 1990-2002 data for small (assets less than $1 billion) U.S. commercial...

We show that exposure from past business transactions risk overhang can reduce activity in related business lines, sometimes to the point where no new trade occurs. Our primary focus is the nonlife-insurance market, where our model predicts that the relative impact, duration, and character of...

"Despite operating under substantial regulatory constraints, we find that commercial banks manage their investments largely consistent with the predictions of portfolio choice models with capital market imperfections. Based on 1990-2002 data for small (assets less than $1 billion) U.S....

Despite operating under substantial regulatory constraints, we find that commercial banks manage their investments largely consistent with the predictions of portfolio choice models with capital market imperfections. Based on 1990-2002 data for small (assets less than $1 billion) U.S. commercial...

We show that exposure from past business transactions--risk overhang--can reduce activity in related business lines, sometimes to the point where no new trade occurs. Our primary focus is the role of overhang in nonlife insurance market disruptions. Our model predicts that the relative impact,...

We estimate a structural model of bank portfolio lending and find that the typical U.S. community bank reduced its business lending during the global financial crisis. The decline in business credit was driven by increased risk overhang effects (consistent with a reduction in the liquidity of...

We show that exposure from past business transactions ? risk overhang ? can reduce activity in related business lines, sometimes to the point where no new trade occurs. We focus primarily on the role of overhang in nonlife insurance market disruptions. Our model predicts that the relative...