We develop an analysis of ex ante monitoring of risky projects in banking. If protected from competition, banks are more concerned about not catching good risk projects when the perceived state of the economy improves, while they are more concerned about being induced to finance bad risk...

The existing literature in both public economics and financial economics often fails to consider how appropriate and effective public policy may be in promoting the venture capital industry. Public economics has dealt extensively with the effect of taxes and subsidies but has neglected the...