Leverage, Moral Hazard, and Liquidity
نویسندگان
چکیده
منابع مشابه
Moral Hazard, Collateral and Liquidity
We consider a moral hazard setup wherein leveraged firms have incentives to take on excessive risks and are thus rationed when they attempt to borrow in order to meet liquidity shocks. The rationed firms can optimally pledge cash as collateral to borrow more, but in the process must liquidate some of their assets. Liquidated assets are purchased by non-rationed firms but their borrowing capacit...
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Bank crises, by interrupting liquidity provision, have been viewed as resulting in welfare losses. In a model of banking with moral hazard, we show that second best bank contracts that improve on autarky ex ante require costly crises to occur with positive probability at the interim stage. When bank payoffs are partially appropriable, either directly via imposition of fines or indirectly by the...
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It is well known that higher unemployment bene ts lead to longer unemployment durations. This result has been interpreted as evidence of moral hazarda behavioral response to distorted marginal incentives to search. This paper shows that unemployment bene ts also raise durations through a liquiditye¤ect for households who cannot smooth consumption perfectly. The empirical importance of the ...
متن کاملDiscussion of “Liquidity, Moral Hazard, and Interbank Market Collapse”
Financial intermediaries, such as banks, perform many roles: they screen risks, evaluate and fund worthy entrepreneurs, pool risks, monitor borrowers, refinance projects, and—when confronted with the default in their loans—they perform a valuable role in loss discovery and assessing whether the bankrupt concern is economically viable or not. All these activities, which constitute the actions of...
متن کاملSimple Models of Operating Moral Hazard and Investing Moral Hazard
In this paper, we depict and analyze simple models of moral hazard, namely “operating moral hazard” and “investing moral hazard.” First we assume that a corporation exists primarily for the benefit of their shareholders. Then, moral hazard occurs when managers choose an option knowingly that is not optimum for shareholders. We evaluate the loss to shareholders in terms of cash flow to them in t...
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ژورنال
عنوان ژورنال: The Journal of Finance
سال: 2011
ISSN: 0022-1082
DOI: 10.1111/j.1540-6261.2010.01627.x