perquisites that yield private benefits). The privately optimal level of bank leverage is neither too low nor too high: It … substitution induced at high levels of leverage. However, when correlated bank failures can impose significant social costs …, governments may have no option but to bail out bank creditors. Anticipation of this generates an equilibrium featuring systemic …

arbitrage. I develop a framework to study bank regulation with strategic selection of risk models. A bank supervisor can …

perapplicant fixed costs in screening. We then demonstrate that our theory fits the data better than the main alternative theory … already in the literature, which supposes cutoff rules are exogenously used by securitizers. Furthermore, we use our theory to …

inclined to pledge outside collateral than is the low-risk borrower. However, this finding does not hold when the bank can …. We also show that a bank’s incentive to sort borrowers may induce investment to preserve the value of the inside …

research has hypothesized that these cutoff rules result from a securitization rule of thumb. Under this theory, an observed … model that rationalizes such an origination rule of thumb. Under this alternative theory, jumps in default are not evidence … securitization rule-of-thumb theory but consistent with the origination rule-of-thumb theory. There are jumps in the number of loans …

In moral hazard models, bank shareholders have incentives to transfer wealth from the deposit insurer - that is … value, and a risk measure, this paper develops a semi-parametric model for estimating the critical level of bank risk at …

This paper examines the impact of implicit guarantees and capital regulations on the behavior of a bank and on the … expected losses for its depositors. I show that implicit guarantees increase the incentives of the bank to enhance leverage and …

The moral hazard incentives of the bank safety net predict that distressed banks take on more risk and higher leverage …, moral hazard incentives dominate distressed bank leverage and risk-taking policies …