We introduce banks to the fiscal theory of price level to study the effectiveness of open market operations in correcting the distortions caused by an improper tax rate. A rise in the tax rate increases the real purchasing power of payment liquidity for short-term consumption, but reduces firms'...

Interconnected banks are prone to the propagation of negative shocks. In a network with banks borrowing from each other using collateral, the risk of financial contagion leads to the emergence of multiple equilibria, featuring different sizes of loans and collateral haircuts. Safe assets are...

Based on archival and survey data we show that the maturity of U.S. business loans has been continuously increasing since the mid-1930s when banks invented the term loan. Concurrently, bank innovation first involved the invention of credit analysis and covenant design. Later, bank innovation...

The controlling shareholder of a firm may suffer from its control of the firm due to unfavorable market reactions associated with concerns on his private benefit extraction. Thus, the controlling shareholder has an incentive to build a good governance mechanism as a commitment device to...

Does government control reduce firm value? A strong government control helps the government to extract social or political benefits from a state-controlled firm, thus decreases its value; but it also makes it more effective for the government to monitor the firm management, thus increases its...

This paper uses a partial equilibrium framework to prove that in the short-term, network hashrate shock affects average miner income through both transaction fee income and block reward income.Using Bitcoin blockchain data, we show that miner average transaction fee income goes in the opposite...

We study an infinite-horizon Lucas tree model where a manager is hired to tend to the trees and is compensated with a fraction of the trees' output. The manager trades shares with investors and makes an effort that determines the distribution of the output. When the manager is less risk-averse...

In the IPO market, investors coordinate on acceptable IPO price based on the performance of past IPOs, and this generates an incentive for investment banks to produce information about IPO firms. In hot periods, the information produced by investment banks improves the quality of IPO firms, and...