We allow the preference of a political majority to determine boththe corporate governance structure and the division of profits betweenhuman and financial capital. In a democratic society where financialwealth is concentrated, a political majority may prefer to restraingovernance by dispersed...

This paper tests a new hypothesis that bank managers issue public debt, at least in part, to convey positive, private information and refrain from issuance to hide negative, private information. This positive selection hypothesis is tested against the traditional adverse selection hypothesis. We...

Using banks' internal models for regulatory purposes, while aimed at making capital requirements more accurate, invites regulatory arbitrage. I show how the strategic use of risk models can be avoided by penalizing banks with low risk-weights when they suffer abnormal losses. As defaulting banks...

The regulatory use of banks' internal models aims at making capital requirements more accurate and reducing regulatory arbitrage, but may also give banks incentives to choose their risk models strategically. Current policy answers to this problem include the use of risk-weight floors and...

We focus on the determinants and potentially associated benefits of relationship banking. Based on existing literature and the unique role intangible assets might play regarding asymmetric information, we derive three testable predictions. Using rich data on firm-bank relationships in Germany,...

This study uses covenant violations to provide evidence on how firms make disclosure decisions in the presence of enhanced bank monitoring. Using a regression discontinuity design, I find that firms reduce disclosure following covenant violations. A series of analyses suggest that part of this...

This study uses covenant violations to provide evidence on how firms make disclosure decisions in the presence of enhanced bank monitoring. Using a regression discontinuity design, I find that firms reduce disclosure following covenant violations. A series of analyses suggest that part of this...

We provide evidence that the presence of bankers in the board of directors reduce information asymmetry between credit markets and firms. We show that the impact of the presence of bankers on leverage is driven by firms with low level of debt. This effect is amplified the more connected the...