We analyze compensation design in banks. Specifically, we document associations with firm characteristics, time …

Banks face two different kinds of moral hazard problems: asset substitution by shareholders (e.g., making risky … risk in which all banks choose inefficiently high leverage to fund correlated assets and market discipline is compromised …

banks use excessive leverage to fund correlated, inefficiently risky loans. Limiting leverage and resolving both moral …

banks use excessive leverage to fund correlated, inefficiently risky loans. Limiting leverage and resolving both moral …

-optimal capital structure trades off these two costs. With uncertainty about aggregate risk, bank creditors learn from other banks … externality that is ignored in privately-optimal bank capital structures. Thus, under plausible conditions, banks choose excessive …

We examine the multi-faceted effect of creditor rights on the way banks monitor, operate and finance themselves. We … present a simple analytical model that shows that a strengthening of creditor rights reduces the need for banks to monitor … their borrowers; and that banks, as a result, tilt their capital structures away from capital that provides the strongest …

The role that banks play in screening and monitoring their borrowers is well understood. However, these bank activities … incentivizing banks to monitor their borrowers. Both bank debt and bank equity have been proposed in various theories as providing … the discipline to induce banks to monitor. However, empirical evidence on how bank capital structure influences borrower …

We empirically examine the Capital Purchase Program (CPP) used by the US government to bail out distressed banks with … attenuate bailout-related moral hazard. Banks were averse to these appointments - the empirical distribution of missed payments …