This paper brings together two seemingly unrelated branches of the literature that focuses on different aspects of a bank's interaction with its borrowers: the relative priority of bank debt, and the role of banks as "relationship lenders". Specifically, we show that bank seniority plays an...

An examination of the risk effects of bank acquisitions that occurred between the first quarter of 1984 and the last quarter of 1993. Its findings -- that banks are not using acquisitions to increase their risk exposure and that acquisitions increase profitability over time -- cast doubt on the...

A look at the disadvantages of a firm's having too much liquidity, explaining that when a company has a great deal of its worth tied up in liquid assets, it has a harder time attracting investors, who must be convinced that the firm's managers will not "take the money and run."

An explanation of how the Glass-Steagall Act, passed to prohibit U.S. commercial banks from engaging in investment banking activities, has led to the same costly cat-and-mouse game between banks and their regulators as did the prohibition against interstate banking, and an argument that...

An analysis of how bank acquisitions affect the performance and asset management of the acquired bank, its acquirer, and the newly formed banking organization, showing that after the acquisition, the acquired bank is transformed along a wide variety of dimensions such that it becomes a replica...

Using a principal-agent model in which an entrepreneur has an investment project whose returns depend on his effort, which is not observable by the financier, the author shows that the optimal contract used to finance such a project can be replicated by a unique combination of debt and equity,...

An intermediation model that examines the efficiency and welfare implications of banks' required capital-asset ratio and of the regulations that limit - and in some countries forbid - banks' investments in equity to a certain proportion of each firm's capital. ; A look at how episodes of...

An analysis of the potential effects of commercial banks' expansion into the securities business, focusing on gains, such as information advantages and economies of scope, as well as on potential costs, including conflicts of interest and risk considerations.