I build a model of optimal managerial compensation where managers each have a privately observed propensity to manipulate short-term stock prices. It is shown that this informational asymmetry reverses some of the conventional wisdom about the relationship between reliance on short-term pay and...

This paper develops a model of an economy where bank credit supports both productive investment and individual consumption smoothing in the face of idiosyncratic income risk. Bank credit is constrained by bank equity capital. When policy-makers inject equity capital during financial crises, they...

This paper studies optimal bank capital requirements in a model of endogenous bank funding conditions. I find that requirements should be higher during good times such that a macroprudential "buffer" is provided. However, whether banks can use buffers to maintain lending during a financial...

Countercyclical bank capital requirements have emerged as a popular regulatory tool to help smooth financial cycles. The idea is to reduce capital requirements when exogenous shocks cause aggregate bank capital to decrease so that regulation does not needlessly constrain banks' supply of credit....

This paper studies the role of voluntary disclosure in crowding out independent research about firm value. In the model, when inside firm owners make it easier for outside investors to obtain inexpensive biased information from the manager, investors rely less on costly unbiased research. As a...

This paper studies monetary policy in an economy where banks make risky loans to firms and provide liquidity services in the form of deposits to households. For given bank equity, market discipline implies that banks can take more deposits when assets are safer or more profitable. Banks respond...