We study the evolution of investment-banking relationships from 1933–2007. Relationship exclusivity and client concerns for the state of their banking relationships were strong through the first part of our sample period but then entered a period of sharp decline beginning around 1970. We...

We investigate the optimal regulation of financial conglomerates which combine a bank and a non-bank financial institution. The conglomerate's risk-taking incentives depend upon the level of market discipline it faces, which in turn is determined by the conglomerate's liability strucure. We...

We analyze financial support for the entrepreneurial sector. State support can raise welfare by relaxing financial constraints, but it can also reduce lending standards if entrepreneurs substitute public sources of collateral for their own assets, if it encourages excessive entrepreneurial...

We present a model in which a long-lived bank endogenously learns about the environment for financial innovation through experimentation on its clients. When the bank has superior knowledge of the state of the world facing its clients, it may engage in inefficient or "reckless" experimentation...

It is received financial wisdom that when there is free entry by speculators, it is impossible to generate net profits on publicly available information. In this paper we study a version of the standard Kyle (85) model with endogenous information acquisition and we find that equilibria exist...

In contrast to practice in the U.S., European IPOs are very rarely priced outside the indicative price range, and frequently are priced at its upper bound. We develop a model that provides a rationale for this seemingly inefficient pricing behavior. The model allows for the practice, observed in...

I analyse a model in which it is socially optimal for banks to manage depositor funds but in which concerns about fraud discourage depositing and justify regulation. The regulator screens bankers and decides the level of charter value which they will receive as incentive to prevent fraud. She...

Financial conglomerates combine banking, insurance and other financial services within a single corporation. In this non-technical paper I consider the rationale for capital regulation in such firms and I examine some current policy questions in the light of this discussion. My first conclusion...

We analyse a general equilibrium model in which there is both adverse selection of and moral hazard by banks. The regulator has two tools at her disposal - she can audit banks to learn their type prior to giving them a licence, and she can impose capital adequacy requirements. When the regulator...