We build a general equilibrium model of banks' optimal capital structure, where bankruptcy is costly and investors have heterogenous endowments and incur a cost for participating in equity markets. We show that banks raise both deposits and equity, and that investors are willing to hold equity...

This paper identifies different sources of risk as important determinants of banks' corporate structures when expanding into new markets. Subsidiary-based corporate structures benefit from greater protection against economic risk because of affiliate-level limited liability, but are more exposed...

We explore the behavior of supervisors when a centralized agency has full power over all decisions regarding banks, but relies on local supervisors to collect the information necessary to act. This institutional design entails a principal-agent problem between the central and local supervisors...

In many countries, the legal system or social norms ensure that firms are stakeholder oriented. We analyze the advantages and disadvantages of stakeholder-oriented firms that are concerned with employees and suppliers compared to shareholder-oriented firms in a model of imperfect competition....

We integrate heterogeneity and uncertainty in investor valuations into a model of takeovers. Investors have dispersed valuations, holding shares in firms they value more highly, and a successful offer must win approval from the median target shareholder. We derive the consequences for an...

We study endogenous participation in asymmetric second price auctions where one bidder is "special". We show seller revenue decreases whenever the special bidder becomes more dominant in the sense of FOSD, or more generally whenever the other bidders' profits are reduced. We also establish an...

In countries such as Germany, the legal system ensures that firms are stakeholder oriented. In others, like Japan, social norms achieve a similar effect. We analyze the advantages and disadvantages of stakeholder-oriented firms that are concerned with employees and suppliers compared to...

Successful private equity managers have funds that are often oversubscribed and provide persistent abnormal returns. Why don't successful managers increase fund size or fees? We argue that managers want to attract high quality entrepreneurs, while entrepreneurs want to match with high ability...

It is commonly believed that equity finance for banks is more costly than deposits. This suggests that banks should economize on the use of equity and regulatory constraints on capital should be binding. Empirical evidence suggests that in fact this is not the case. Banks in many countries hold...