Through their transformation of assets, banks carry a considerably degree of non-diversifiable economic risks on their books, and given that banks are extremely sensitive to deadweight costs of financial distress, we ask whether international extensions of credit may improve the diversification of such risks. Using an unpublished data set on the cross-border claims of banks located in four coun...

The paper analyzes the welfare implications of mandatory disclosure of losses at financial institutions when it is common knowledge that some banks have incurred losses but not which ones. We develop a model that features “contagion,” meaning that banks not hit by shocks may still suffer losses because of their exposure to banks that are. In addition, banks in our model have profitable investme...

We quantify the effects of lending and balance sheet channels on corporate investment during large crises in emerging markets. The depreciated currency creates investment opportunities in the tradable sector but firms might be financially constrained due to: 1) a deterioration of their balance sheet via un-hedged foreign currency debt (balance sheet channel) and 2) a decline in the supply of cr...

Among stock-market-listed Japanese firms in 1994-95, the financial health of the firm's main bank did not significantly affect its investment behavior, after controlling for stock market valuation and cash flow. However, among the subset of bank-dependent firms, investment was lower by over 50 percent at firms that have one of the lowest-rated banks as their main bank. Because low-rated banks a...

We study the interaction between interbank competition and accounting information quality and their effects on banks’ risk-taking behavior. We identify an endogenous false-alarm cost that banks incur when forced to sell assets to meet capital requirements. We find that when the interbank competition is less intense, an improvement in the quality of accounting information encourages banks to tak...

Allowing CEOs to hedge the risk in the compensation contracts their …rms give them has been controversial because such hedging permits the executives to undo some of the incentive e¤ects of those contracts; it also results in a divergence between the compensation …rms pay their senior executives and the compensation those executives e¤ectively receive. We analyze the personal hedging activities...

there are two main reasons for studying investment in an economy. first, the combination of firms? investment demand and household?s saving supply determines how much of an economys? resoures is invested. second, investment is highly volatile; thus investment demand may be important in the short-run fluctuations. the present article examins the relationship and veracity of existence of banks pr...

in the commercial banking activities, efficiency is an important issue for the bank managers, monitoring part and clients. this study has appraised the efficiency performance of the commercial banks in iran. the research method has been using windows data envelopment analysis with constant and variable returns to scale and input oriented model at the period of 1991-2006. the sample of study was...

Investment banks frequently hire analysts from rating agencies. A widely held view is that this “revolving door” undermines analysts’ incentives to issue accurate ratings. Using a hand-collected dataset of the performance and career paths of 245 credit analysts between 2000 and 2009, I show that the ratings by analysts who move to investment banks are on average more accurate than those by thei...

We extend the set of regulatory instruments for banks’ liquidity provision by adding a policy instrument for controlling the fraction of perfectly-liquid accounts. We demonstrate how this instrument induces self-selection on behalf of depositors who are differentiated according to their probability of facing a liquidity shock. This selfselection leads to a market segmentation, which can break t...