This paper investigates the market microstructure effects on client firms of equity holdings by relationship banks, i.e., lenders and/or underwriters, prior to the 2008 financial crisis. It intends to shed light on the need for “the Volcker Rule.” We find that banks' equity holdings of...

Recent empirical studies suggest that, during times of unexpected innovation, agents heterogeneously update their beliefs about an asset fundamental value, and they are uncertain about other agents' beliefs on it. In this paper I show that, when there is uncertainty about the market sentiment,...

We analyze an entrepreneur's choice between angel and venture capital (VC) financing in a competitive investment market, where the entrepreneur seeks to maintain his ownership share as well as equity value. The key to our analysis is the idea that a negative signal is inferred by the market if...

In the following paper we analyze the strategic competition between fast and slow traders. The model of Kyle (1985) is adapted to analyze the effect of speed in such a model. A High Frequency Trader (HFT) is defined as a trader that has the ability to react to information faster than other...

Companies collected billions in premiums from peculiarly structured put options written on their own stock, while almost all of these puts expired worthless quarter after quarter. Buyers of these options, primarily investment banks, lost money as a result. Although these losses might seem...

This study analyzes the relationship between an M&A advisor's holdings of call options on M&A targets before announcements and the abnormal returns of such targets. Financial institutions with regular exposure to advisory business hold call options on selected targets, for which the announcement...

Financial literacy has become a topical issue in recent years. This paper seeks to summarize the growing efforts of financial literacy field in Zimbabwe, with special reference to banks. Financial literacy should be a concern to the government especially the Central Bank, Commercial Banks, other...

We develop a rational expectations model in which an issuer purchases credit ratings sequentially, deciding which to disclose to investors. Opacity about contacts between the issuer and rating agencies induces potential asymmetric information about which ratings the issuer obtained. While the...

We test whether ratings are comparable across asset classes over a 30-year sample. We examine default rates by initial rating, accuracy ratios, migration metrics, instantaneous upgrade and downgrade intensities, and rating changes over bonds' entire lives in multivariate regressions. These...

Before shares of a company are sold to the general public on a security exchange for the first time, regulatory publication requirements force U.S. firms to file an initial public offering prospectus. While accounting information in IPO filings are closely studied by investors and analysts,...