The banking literature has established that banks can alleviate information asymmetries between lenders and borrowers, while the Q literature has used cash flow sensitivity analysis to test whether financing constraints hinder investment. This paper investigates whether bank ties in Japan were costly for mature and healthy firms in the 1980’s and 1990’s, and whether banks continued to facilitat...

Companies across all sectors with increasingly smaller size rely on alliance relationships to bolster revenues during times of economic uncertainty. When forming alliances, large firms typically hire vendors such as investment banks to help identify potential alliance partners. However, small businesses with intention to build alliance find difficulties to search desired partners especially on ...

We use a model of mean-shifting investment technologies to study the relationship between market structure, risk taking and social welfare in lending markets. Introduction of loan market competition is shown to reduce lending rates and to generate higher investments without increasing the equilibrium bankruptcy risk of borrowers. Hence, there need not be a tradeo€ between lending market competi...

The performance and effectiveness of financial institutions are important considerations for policy-makers concerned about economic growth. Growth, after all, is heavily dependent on investment, and a significant fraction of all investment flows through financial institutions. Furthermore, incidences of financial instability in some countries have shown that poor financial policies can have ser...

Companies have collected billions in premiums from privately sold put options written on their own stock. It is puzzling that counterparties, investment banks, would agree to make such transactions with better-informed companies which extraordinary ability time the market as documented by Jenter et al. (2011). To resolve this puzzle, we develop a model shows offering buy parties, receive privat...