This paper studies how the elimination of the corporate tax bias on bank leverage affects banks' credit provisioning using the introduction of an allowance for corporate equity (ACE) in Belgium. We find that affected banks increased their contribution within cross-border syndicated loan...

An increase in collateral availability can reduce the need for bank auditing. We test this hypothesis using reforms which expanded the set of pledgeable assets in secured lending, and find heterogeneous effects in the cross-section of banks. Smaller (relationship) banks are safer and earn a...

Asset price bubbles play an important role in resource allocation and affect the industry dynamics. We use the Chinese Stock market data and the micro data for manufacturing firms in China between 1998 and 2007 to develop an estimation on industry dynamics from four channels including...

We study the impact of a financial transaction tax (FTT) in a model that combines asset trade and real investment. An informed trader holds private information about the fundamental value of a firm and the firm's manager relies on the asset price to infer such information and invest accordingly....

We propose a model of financial system architecture that highlights the positive interaction between banks and markets in a setting where each agent believes that she can evaluate information better than any other agent. Banks emerge endogenously and their interaction with markets is facilitated...

In the leveraged loan sector, firms borrowing from non-banks have worse profitability and lower investment following loan origination, than observably similar firms borrowing from banks. Further, we find that non-banks are more likely to impose Capex restrictions. The effects are absent in the...

Natural disasters may cause extensive damage to local communities. In 2021, the historically low-temperature snowstorm Uri hurt Texas by disrupting business and activities, constraining energy distribution and consumption, and preventing residents from accessing critical resources. To mitigate...

We develop a model that explains two stylized facts - the coarseness of credit ratings relative to the underlying default probabilities, and the countercyclical nature of ratings imprecision. The imprecise nature of coarse ratings arises from the revenue-maximizing behavior of rating agencies,...

We examine the impact of uncertainty on loan contract terms for UK public and private firms, using the 2016 Brexit referendum as an exogenous shock to uncertainty. We find that uncertainty leads to a higher cost of borrowing in the syndicated loan market for private firms relative to public...

An increase in borrowers’ collateral availability can reduce the need for soft information acquisition by banks. I test this hypothesis using reforms which expanded the set of pledgeable assets in secured lending and find heterogeneous effects in the cross-section of banks. Relationship...