We examine the coexistence of banks and financial markets, studying a credit market where the qualities of investment projects are not observable and the investment decisions of entrepreneurs are not contractible. Standard banks can alleviate moral-hazard problems by securing a portion of a...

We examine the coexistence of banks and financial markets, studying a credit market where the qualities of investment projects are not observable and the investment decisions of entrepreneurs are not contractible. Standard banks can alleviate moral-hazard problems by securing a portion of a...

Our paper explores the influence of credit derivatives on bank credit supply theoretically and empirically. We build a two-stage model of financial intermediation, which treats the bank under consideration as one of a large number of monopolists in the local credit market. From the theoretical...

With the reform of the RMB exchange rate regime, China's banks expose to more exchange rate risks and use foreign exchange derivatives to manage these risks. This paper develops a theoretical model to examine the relationship between foreign exchange derivatives and the foreign currency lending...

With interest rate liberalization, China's commercial banks expose to more interest rate risks and use interest-rate derivatives to manage these risks. This paper develops a theoretical model, capturing the main characteristics of the banking sector in China, to analyze the effect of...

This paper addresses the desirability of competition in banking industry. In a model where banks compete on both deposit and loan markets and where banks can use monitoring technology to control entrepreneurs' behavior, we investigate three questions: what are the effects of competition on...

This paper investigates the relationship between operating cost efficiency and the loan quality of Russian banks. It tries to answer the question whether it is always beneficial for banks to be highly cost efficient (the “bad management” hypothesis) or whether this higher cost efficiency...

This paper addresses the topic regarding the desirability of competition in banking industry. In a model where banks compete on both deposit and loan markets and where banks can use monitoring technology to control entrepreneurs' behavior, we investigate three questions: what are the effects of...

We consider the impact of mandatory information disclosure on bank safety in a spatial model of banking competition in which a bank's probability of success depends on the quality of its risk measurement and management systems. Under Basel II capital requirements, this quality is either fully or...

Reliable information on small and medium sized enterprises (SMEs) is rare and costly for financial intermediaries. To compensate for this, relationship banking is often considered as the appropriate lending technique in the case of SMEs. In this paper we offer a theoretical model to analyze the...