Showing 31 - 40 of 131
We study whether the socially optimal level of stability of the banking system can be implemented with regulatory capital requirements in a multi-period general equilibrium model of banking. We show that: (i) bank capital is costly because of the unique liquidity services provided by demand...
Persistent link: https://www.econbiz.de/10005829259
The savings/investment process in capitalist economies is organized around financial intermediation, making them a central institution of economic growth. Financial intermediaries are firms that borrow from consumer/savers and lend to companies that need resources for investment. In contrast, in...
Persistent link: https://www.econbiz.de/10005710708
Persistent link: https://www.econbiz.de/10005726459
Banks and related financial institutions often have two separate subsidiaries that make loans of similar type but differing risk, for example, a bank and a finance company, or a "good bank/bad bank" structure. Such "bipartite" structures may prevent risk shifting, in which banks misuse their...
Persistent link: https://www.econbiz.de/10005214306
This paper models the optimal choice of shareholder liability. If investors want managers to be monitored, the monitors should be residual claimants (shareholders), and monitoring and firm value will increase as shareholders commit more of their wealth to the firm. When liquidating wealth is...
Persistent link: https://www.econbiz.de/10005214490
Theory suggests that banks' private information about borrowers lets them hold up borrowers for higher interest rates. Since hold-up power increases with borrower risk, banks with exploitable information should be able to raise their rates in recessions by more than is justified by borrower risk...
Persistent link: https://www.econbiz.de/10005334362
An institution holding shares in a firm can use information about the firm both for trading ("speculation") and for deciding whether to intervene to improve firm performance. Intervention increases the value of the institution's existing shareholdings, but intervention only increases the...
Persistent link: https://www.econbiz.de/10005334616
Firms sometimes commit fraud by altering publicly reported information to be more favorable, and investors can monitor firms to obtain more accurate information. We study equilibrium fraud and monitoring decisions. Fraud is most likely to occur in relatively good times, and the link between...
Persistent link: https://www.econbiz.de/10005564011
We examine firm managers' incentives to commit fraud in a model where firms seek funding from investors and investors can monitor firms at a cost in order to get more precise information about firm prospects. We show that fraud incentives are highest when business conditions are good, but not...
Persistent link: https://www.econbiz.de/10005134707
The savings/investment process in capitalist economies is organized around bank-like financial intermediaries ("banks[equal, rising dots]), making them a central institution of economic growth. These intermediaries borrow from consumer/savers and lend to companies that need resources for...
Persistent link: https://www.econbiz.de/10005221091