This paper analyzes how banks' funding constraints impact the access and cost of capital of small firms. Banks raise external finance from a large number of small investors who face coordination problems and invest in small, risky businesses. When investors observe noisy signals about the true...

This paper analyzes how banks' funding constraints impact the access and cost of capital of small firms. Banks raise external finance from a large number of small investors who face coordination problems and invest in small, risky businesses. When investors observe noisy signals about the true...

What are the pros and cons of involving external auditors in banking supervision? This paper investigates the relationship between banking supervision and the involvement of external auditors from a theoretical and empirical perspective. We first provide a simple principal-agent framework that...