We empirically examine three channels in the relation between banks' CDS trading and loan sales. The substitute channel predicts a negative relation between CDS hedging and loan sales, and the complementary channel predicts a positive relation. The credit-enhancement channel predicts a positive...

We empirically study the determinants of failures of microfinance institutions based on the CAMELS rating components and microfinance-specific measures by applying probit regression techniques. Our findings confirm the capital adequacy (C), the asset quality (A), the management capability (M),...

Recently a new type of institution has emerged, crowd funders. These entities: 1) channel capital to create intellectual property; 2) gather information on project and entrepreneur quality; and 3) gauge demand information directly from individuals to improve the efficiency of capital allocation....

Fund managers are double agents; they serve both fund investors and owners of management firms. This conflict of interest may result in trading to support securities prices. Tests of this hypothesis in the Spanish mutual fund industry indicate that bank-affiliated mutual funds systematically...

We find that lenders today rely on less restrictive financial covenants than 20 years ago, resulting in a nearly 70% drop in the annual proportion of U.S. public firms reporting a loan covenant violation. To study this decline, we develop a simple model of optimal covenant design that balances...

We find that credit lines (CLs) play special roles in syndicated lending, committing lead banks to screen, monitor, and invest in relationships with borrowers. Institutional term loans (ITLs) packaged with CLs have lower interest rate spreads in the primary market and narrower bid-ask spreads in...

Do banks worry about expropriation when an activist hedge fund targets their borrowers or are they reassured that their borrowers will perform better after such targeting? We study 1,435 events during the 1996-2013 period in which an activist targeted a US corporation, to examine what happens to...

We show that investors reach for yield by taking more duration risk along with more credit risk. The two types of risk-taking behavior have opposite effects on borrowing firms. Higher credit risk-taking increases credit supply to riskier firms. Higher duration risk-taking by investors pushes...

Non-bank mortgage originators, which operate through the originate-to-distribute (OTD) model, account for more than half of all the mortgage origination in the U.S. However, less is known about which factors drive the quality and quantity of mortgage originations through non-banks. I show that...

We document a major mechanism – inorganic growth – which drives a wedge between micro-study effects of credit supply shocks and aggregate effects. Exploiting a quasi-exogenous positive shock to credit supply, we document that affected firms borrow larger amounts and exhibit stronger asset,...