Fair value refers to current values as the backbones of accounting measurements. Current value follows the efficient financial market (EFM) hypothesis - which abstracts away from economic realization - as guidance for the financial market investment process through ignorance and hazard. This...

During the global financial crisis, a large number of banks worldwide either failed or received financial aid thus inflicting substantial losses on the system. We contribute to the early warning literature by constructing a dynamic competing risks hazard model that explores the joint...

Many economists and policy-makers believe that bailouts of systemically important financial institutions (SIFIs), though unavoidable ex post, are inefficient ex ante: The expectation of such bailouts is said to lead to moral hazard in the form of excessive risk taking. We argue that this view...

Ongoing financial innovation and greater information availability increase the tradability of bank assets and reduce banks' dependence on individual bank managers as private information in the lending process declines. In this paper we argue that this has two effects on banks, with opposing...

During the past two decades 130 of the 182 IMF member countries have experienced serious problems in their banking sectors or an outright banking crisis. Among the stylized facts about these crises are their often systemic nature, a pronounced boom-bust cyde and substantial financial involvement...

Moral hazard plays a central role in almost every narrative of the recent financial crisis: government's implicit guarantees led to excessive risk-taking, and when the guarantees turned explicit, it exacerbated moral hazard going forward. The moral hazard narrative of crisis causes and effects...

This paper sheds light on the linkages between banking crises and the effectiveness of short-run loans in reducing bank failure, bank runs, and potential looting by bankers. It develops an overlapping generations framework which incorporates the possibility that an anticipating liquidity...

Banks and other financial institutions which were too-big-to-fail (TBTF) played a central role during the Global Financial Crisis of 2007-2009. The present article lays out how misguided policies enabled banks to grow both in size as well as in complexity and therefore acquire TBTF status,...

The recent crisis has shown that systemically relevant banks in distress are likely to benefit from governmental support. This reduces their downside risk and leads to moral hazard, i.e. to incentives for these banks to assume excessive risks. In this paper we show empirically that implicit...