Assessing the discriminative power of rating systems is an important question to banks and to regulators. In this article we analyze the Cumulative Accuracy Profile (CAP) and the Receiver Operating Characteristic (ROC) which are both commonly used in practice. We give a test-theoretic...

Should banks be diversified or focused? Does diversification indeed lead to enhanced performance and, therefore, greater safety for banks, as traditional portfolio and banking theory would suggest? This paper investigates the link between banks? profitability (ROA) and their portfolio...

Should banks be diversified or focused? Does diversification indeed lead to increased performance and therefore greater safety on the part of banks as traditional portfolio and banking theory would suggest? This paper investigates the link between banks' profitability and their portfolio...

This paper examines the German IPO pricing process which combines bookbuilding with a liquid pre-IPO when-issued market. We find no partial adjustment phenomenon, as has been documented for U.S. IPOs. We thus find no evidence that bookbuilding provides information for IPO pricing, beyond the...

We develop a model that allows for the coexistence of bookbuilding and when-issued trading. We show that, due to interactions between these two processes, allowing for when-issued trading is for the most part beneficial for issuers. When-issued trading may interfere with information gathering...

We analyze global data about electricity generation and document that the risk exposure of a firm's owners and its workers depends on competitors' ability or willingness to change their output in response to productivity shocks. Competitor inflexibility appears to be a risk factor: the sales of...

We analyze the relation between firms' exposure to exogenous business risk and their financing choices, based on a sample of firms for which we can measure such exposure. The results show that firms more exposed to exogenous risk use less debt financing. We also analyze the relation between the...

We analyze the relation between firms' exposure to exogenous business risk and their financing choices, based on a sample of firms for which we can measure such exposure. The results show that firms more exposed to exogenous risk use less debt financing. We also analyze the relation between the...

How does small-firm employment respond to exogenous labor productivity risk? We find that this depends on the capitalization of firms' local banks. The evidence comes from firms offering (quasi-) fixed employment to workers whose productivity depends on the weather. Weather risk reduces this...

How does small-firm employment respond to exogenous labor productivity risk? We find that this depends on the capitalization of firms' local banks. The evidence comes from firms offering (quasi-) fixed employment to workers whose productivity depends on the weather. Weather risk reduces this...