The paper analyzes the interaction between an endogenous capital structure and investment decision, and the incentive scheme of bank executives. We show that the implementation of capital requirements, which are contingent on compensation schemes, drive a wedge between the interests of the...

We examine the saving behavior of banks retail customers. Our unique dataset comprises the contract and cash flow information for approximately 2.2 million individual contracts from 1991 to 2010. We find that contractual rewards, i.e., qualified interest payments, and government subsidies,...

This paper shows that the abolition of state guarantees to publicly owned banks in Germany resulted in an increase in refinancing costs at German savings banks. Rather than being the result of increased market discipline, the increase in refinancing costs is shown to be driven by spillover...

This paper analyzes how a bank shareholder optimally designs the compensation scheme of a bank manager if there are agency problems between the shareholder and the manager, and how this design changes in reaction to anticipated bail-outs. If there is a problem of excessive risk-taking, bail-out...

We investigate whether information sharing among banks has affected credit market performance in the transition countries of Eastern Europe and the former Soviet Union, using a large sample of firm-level data. Our estimates show that information sharing is associatedwith improved availability...

We argue that contingent convertible capital (CoCo-Bonds) might have perverse risk-taking incentives for banks (asset substitution problem) and discourage them from investing in positive NPV projects and issuing new equity in times of crisis (debt overhang problem). Whenever the conversion price...

The industrial organization approach to banking is extended to analyze the effects of interbank market activity and regulatory liquidity requirements on bank behavior. A multi-stage decision situation allows for considering the interaction between credit risk and liquidity risk of banks. This...

In a theoretical model of the Diamond-Dybvig style, in which deposit-taking banks and financial markets coexist, bank behavior is analyzed taking into account a positive ex-ante probability of a future financial crisis. We focus on the role of the interaction of market liquidity and banks'...