Since the global financial crisis and the related restructuring of banking systems, bank concentration is on the rise in many countries. Consequently, bank size and its role for macroeconomic volatility (or: stability) is the subject of intense debate. This paper analyzes the effects of...

We consider a model of active asset management in which mutual fund managers exert unobservable effort to earn excess returns. Investors allocate capital to both actively managed funds and passively managed products (e.g., index funds or ETFs). In the model's equilibrium, investors are...