We consider a moral hazard economy with the potential for collusion between bankers and borrowers to study how incentives for risk taking are affected by the quality of supervision. We show that low interest rates or a low return on investment may generate excessive risk taking. Because of a...

This paper offers a critical survey of the literature on the role of financial deepening in economic development, focusing on the role of government. Specifically, I distinguish between the policy view that relates financial sector development to an array of necessary policies and institutions,...

Using household surveys and bank penetration data at the district-level in 2006 and 2009, this paper examines the impact of Equity Bank—a leading private commercial bank focusing on microfinance—on the access to banking in Kenya. Unlike other commercial banks in Kenya, Equity Bank pursues...

This paper develops the building blocks for a legal theory of finance. LTF holds that financial markets are legally constructed and as such occupy an essentially hybrid place between state and market, public and private. At the same time, financial markets exhibit dynamics that frequently put...

We examine the validity of a macroeconomic version of the Modigliani-Miller theorem. For this purpose, we develop a general equilibrium model with two production sectors, risk-averse households and financial intermediation by banks. Banks are funded by deposits and (outside) equity and monitor...

How to evaluate a fund manager’s skill is a central question in empirical finance. Prior literature has defined skill as an ability to either pick stocks or time the market, at all times. We propose a new definition of skill as a general cognitive ability used in different ways at different...

China has taken important steps to reform its economy and capital markets in the past 20 years. Despite these efforts there is a lack of quantitative evidence on how these measures have impacted price returns in the stock exchanges. The purpose of this research was to determine the randomness of...

In practice, it is observable that firms tend to smooth periodical earnings because periodical earnings are considered by capital markets as a proxy for firms' success, and therefore, are often operationalized by the respective compensation plans for managers. Considering financial hedging...

We examine co-movements of nine Asian equity markets with both the US and Japan with special interest in distinguishing co-movements during periods of positive returns from those during periods of negative returns. A discrete asymmetric piecewise linear conditional mean returns specification is...

This paper investigates the monthly initial return and its conditional return volatility for Chinese IPOs. We find that the mean initial return (IR) and cross-sectional return volatility are highly auto- and cross-correlated, and time-varying. We propose a system of two simultaneous equations: a...