Procyclicality has emerged as a potential drawback to adoption of risk-sensitive bank capital requirements. Systematic risk factors may result in increases (decreases) in bank capital requirements when the economy is depressed (overheated), thereby decreasing (increasing) bank lending capacity...

This article investigates the governance role of banks exercised through the replacement of underperforming CEOs in borrowing firms. An average level of bank loans outstanding implies a 24% to 47% increase in the forced turnover probability of a borrowing firm's CEO if a firm's industry adjusted...

We derive the optimal financial claim for a bank when the borrowing firm's uninformed stakeholders depend on the bank to establish whether the firm is distressed and whether concessions by stakeholders are necessary. The bank's financial claim is designed to ensure that it cannot collude with a...

We derive the optimal financial claim for a bank when the borrowing firm's uninformed stakeholders depend upon the bank to establish whether the firm is distressed and whether concessions by stakeholders are necessary. The bank's financial claim is designed to ensure that it cannot collude with...

This paper is the first in the literature to examine the determinants of US credit card penalty fees, which in 2004 amounted to $13 Billion, in a credit card market that had $800 Billion debt outstanding. Standard theory states that the price of debt should be related to default risk, yet many...

Using a new data set of U.K. syndicated loans, we document a significant loan cost disadvantage incurred by privately-held firms. For identification, we use the distance of a firm's headquarters to London's capital markets as a plausibly exogenous variation in corporate structure (i.e....

When a borrowing firm's existing loans trade for the first time in the secondary loan market, it elicits a significant positive stock price response by the borrowing firm's equity investors. We show that underlying this response is the impact of loan sales in alleviating a borrowing firm's...

This paper analyzes the behavior of deposit flows in failed banks and (a control) sample of non-failed banks over the 1929-1933 period. Evidence of significant contagion effects were found for the 1930-1932 period. No apparent contagion effects were found for the 1930-1932 period. No apparent...

This paper examines cross-subsidy, moral hazard and bank liability issues related to the provision of federal deposit insurance by acirc;not;Sre-runningacirc;not;? its implementation, i.e., determining fair premium values, over the period 1927-1932. The pre-1933 period was characterized by...

This paper uses real estate investment data for major groups of U.S. financial institutions--- commercial banks, thrifts and life insurance companies to evaluate their investment timing performance over the 1970-1989 period. Our finding is that real estate investments by these institutions have...