This paper adopts a dynamic contracting framework to study the design of prudential regulation of a bank engaging in excessive risk-taking. The bank's manager can enhance short term profits by either exerting effort or taking on excessive risk, which increases the bank's exposure to tail risk....

The recent empirical studies suggest that a change in the policy interest rate has a significant impact on the liquidity management of the banks.Focusing on the role of the interbank market in mitigating a trade-off associated with the cost of precautionary hoarding of liquidity, this paper...

We study the political economy of bank capital regulation from a positive and normative perspective. In a general equilibrium setting, capital requirements and lobbying contributions are determined as the outcome of bargaining between banks and politicians. We show that bankers and politicians...

The dissertation includes four studies broadly connected to the causes and consequences of the Global Financial Crisis of 2007-8 from a political economy perspective. Following the intro-duction, Chapter 2 analyzes the political roots of massive foreign reserves accumulation, which has...

After the governance crisis of 2001-2003 and the regulatory response through the Sarbanes-Oxley Act and the European corporate governance codes, the financial crisis has revealed persistent governance problems in financial institutions relating to executives, non-executives and shareholders. For...

This paper introduces a voting model into a setting with negative borrowing externalities to study voter preferences for prudential regulation. Voters internalize the general equilibrium impact of prudential policy on future asset prices and therefore support a universal limit on current debt....

Over the past four decades, across the OECD countries and beyond, we observe a simultaneous increase (a) in the number, the budgets and the staffing of regulatory agencies, as well as the number of regulations, and (b) of economic liberalization, as measured by economic freedom and doing...

The dissertation includes four studies broadly connected to the causes and consequences of the Global Financial Crisis of 2007-8 from a political economy perspective. Following the intro-duction, Chapter 2 analyzes the political roots of massive foreign reserves accumulation, which has...

We integrate Basel II (and III) regulations into the industrial organization approach to banking and analyze lending behavior and risk sensitivity of a risk-neutral bank. The bank is exposed to credit risk and may use credit default swaps (CDS) for hedging purposes. Regulation is found to induce...

This paper extends the literature on bank capital structure by modeling capital structure as a function of important public policy and bank regulatory characteristics of the home country, as well as of bank-specific variables, country-level macroeconomic conditions, and country-level financial...