In a model where banks play an active role in monitoring borrowers, we analyze the impact of securitization on bankers’ incentives across different macroeconomic scenarios. We show that securitization can be part of the optimal financing scheme for banks, provided banks retain an equity...

This paper investigates the determinants of the structure of the banking industry by fitting a monopolistic competition model to a sample of banks drawn from eight EEC countries over 1989-1993. In the theoretical model, banks decide strategically both entry and the branching size of thier...

This paper investigates the determinants of the structure of the banking industry by fitting a monopolistic competition model to a sample of banks drawn from eight EEC countries over 1989-1993. In the theoretical model, banks decide strategically both entry and the branching size of their...

This paper analyzes banks choice between lending to firms individually and sharing lending with other banks, when firms and banks are subject to moral hazard and monitoring is essential. Multiple-bank lending is optimal whenever the benefit of greater diversification in terms of higher...

When a firm has external debt and monitoring by shareholders is essential, managerial bonuses are shown to be an optimal solution. A small managerial bonus linked to firm's performance not only reduces moral hazard between managers and shareholders, but also between creditors and monitoring...