Stress-tests provide complementary information about banks’ risk exposures. Recent empirical evidence, however, has uncovered potential inaccuracies in stress-test based assessments. We investigate the regulatory implications of these inaccuracies. Without stress-tests, the regulator cannot...

We study the role of the bank-lending channel in propagating fluctuations in commodity prices to credit aggregates and economic activity in developing countries. We use data on more than 1,600 banks from 78 developing countries to analyze the transmission of changes in international commodity...

This paper conducts the first assessment of shareholder activism in banking and its effects on risk and performance. The focus is on the conflicts among bank shareholders, managers, and creditors (e.g., regulators, deposit insurer, taxpayers, depositors). This paper finds activism may generally...

The U.S. bank stress tests aim to improve financial system stability. However, they may also affect bank credit supply. We formulate and test opposing hypotheses about these effects. Our findings are consistent with the Risk Management Hypothesis, under which stress-tested banks reduce credit...

We examine how bank efficiency during normal times affects survival, risk, and profitability during subsequent financial crises using data from five U.S. financial crises and preceding normal times. We find cost efficiency during normal times helps reduce bank failure probabilities, decrease...