We document that banks which cut lending the most during the Great Recession were lending to the riskiest firms. Motivated by this evidence, we build a competitive matching model of bank-firm relationship, in which firms with riskier projects borrow from the banks with lower holding costs (e.g....

This paper is structured in three main parts. The first part, consisting of the first four chapters, provides a brief comparison of the Portuguese and Czech banking sectors and describes the major modifications that they have suffered over the 20th and 21st Centuries, including the impact of the...

This paper analyzes banking crises using a quantitative model with equilibrium default for both firms and banks. The main results are: 1) small open economies have larger banking crises than closed or large economies. Constant international rates do not mitigate interbank spreads and amplify...

How do banks transmit long-term central bank liquidity injections to borrowers? We exploit unique variation in how the ECB's 2011-12 Long-Term Refinancing Operations (LTROs) affected lending to firms discontinuously across credit ratings (within banks) to make four contributions. (i) We show the...

In mortgage debt contracts, real property serves as collateral and the terms of mortgage financing are largely conditional on the certification of collateral value by appraisers. However, overstatement of collateral value is common in the appraisal industry, causing troubles in the mortgage...

Banks rely on risk managers to prevent their employees from making high risk low value investments. Why can't the CEOs directly incentivize their employees to choose the most profitable investment? I show that having a separate risk manager is more profitable for banks and is also socially...

We re-examine the methods used in estimating comovements among U.S. regional home prices and find that there are insufficient moments to ensure a normal limit necessary for employing the quasi-maximum likelihood estimator. Hence, we propose applying the self- weighted quasi-maximum exponential...

This paper studies the relationship between government bailouts and bank risk taking. We show that the impact of government bailouts (in the form of liquidity injections) on bank risk taking, depends on the exogenous level of systematic risk. In a model where the output follows a geometric...

There has been a misleading revival of an old precept in Islamic finance - ‘no risk, no gain'- in the wake of the global financial crisis that started with the 2007 sub-prime debacle in the US. The recent proponents of the precept argue that the basic reason for the recurrence of such crises...

This paper assesses whether and how financial development triggers the occurrence of banking crises. It builds on a database that includes financial development as well as financial access, depth and efficiency for almost 100 countries. Through estimation of a dynamic logit panel model, it...