Theoretical concepts and empirical tests in one area of economics and finance can provide insights into other areas far removed from the original area of inquiry. We show that efficiency wage theory (EWT) helps explain differences in commercial bank financial performance. EWT is a macroeconomic...

We develop a model that provides an economic rationale for breach-of-contract liability for financial institutions: profit seeking alone is often an insufficient incentive to exploit all economically beneficial lending opportunities. We show that liability for reneging on commitments to lend...

Applied researchers are increasingly realizing that small-area impact models should be calibrated by survey-based data. This paper uses a comprehensive, cross-sectional data set to calibrate the economic base model for small communities. Four alternative ...

Theoretical studies suggest that increased transparency reduces a firm's cost of capital (Diamond & Verrecchia, 1991). Thus, more transparency should improve financial performance. We examine the relation between firm transparency and bank holding company (BHC) profit efficiency using the number...

We build a bank-specific, fixed-effects regression model to develop proxies for a bank's monitoring effort. Our results show that banks that devote more resources to monitoring (based on these proxies) are more profit efficient and the effect is large. A very important theoretical literature in...

A number of studies have argued that the thrift industry is not viable as it is presently structured and regulated because mortgage yields are inadequate to cover interest and operating costs. This hypothesis suggests that observed profitability is primarily the result of the tendency of the...

Gorton and Winton (1998) link the size of the banking system in transition economies to financial stability. We provide empirical evidence consistent with their notion that the size of the financial system will be smaller in these countries. This effect holds even after controlling for the...