This paper tests two competing hypotheses about the influence of financial institutions as large shareholders on the performance of their industrial portfolio firms: the superior monitoring hypothesis versus the rent extraction hypothesis. The methodology of this study exploits the abolishment...

Lack of transparency in securitization transactions significantly contributed to thesevere financial crisis of 2007–2009. To increase transparency we—based on arecent idea by Markowitz (2009)—propose an incentive compatible mechanismfor future securitization transactions: financial claims...

What are liquidity crises? And what can be done to address them? This short paper brings together some personal reflections on this issue, largely based on previous work. In the process, it questions a number of commonly held beliefs that have become part of the conventional wisdom. The paper is...

In this paper we propose a framework for measuring and stress testing the systemic risk of a group of major financial institutions. The systemic risk is measured by the price of insurance against financial distress, which is based on ex ante measures of default probabilities of individual banks...

This study examines empirically whether corporate ratings by the credit ratingagency Standard & Poor’s reflect fundamental and publicly observable shocks tothe credit quality of companies. This serves to assess the degree of informationsensitivity of external ratings, and the timeliness of...

This paper examines the potential distortion of prices in the CDS marketcaused by too-big-to-fail. Overall, we find evidence for market discipline inthe CDS market. However, CDS prices are distorted due to a size effect whicharises when investors expect a public bail-out as a result of...

This paper analyzes the association between aggregate default and recovery rates on credit assets, and seeks to empirically explain this critical relationship. We examine recovery rates on corporate bond defaults, over the period 1982-2002.(...)

With its standards FAS 141 and 142 the Financial Accounting Standard Board has revo-lutionized the accounting for business combinations. One of the major changes is theabolishment of goodwill-amortization, which has been replaced by an annual impairmenttest at the level of a reporting unit....

Analysts providing more accurate earnings forecasts also issue moreprofitable recommendations. We demonstrate how investors can profit fromthis contemporaneous link by differentiating between “able” and “lucky”analysts. In line with previous studies, we find that past track records...

Although the world of banking and finance is becoming more integrated every day, in most aspects the world of financial regulation continues to be narrowly defined by national boundaries. The main players here are still national governments and governmental agencies. And until recently, they...