This paper investigates the mechanism through which short selling of a bank’s stocks can trigger the failure of the bank. In the model, creditors, who learn information from stock prices, will grow increasingly unsure about the bank’s true fundamentals in facing noisier stock prices; thus a run on the bank is more likely because of creditors’ concave payo¤. Understanding this, speculators condu...

This paper investigates politically connected firms in Germany. With the introduction of a new transparency law in 2007, information on additional income sources for all members of the German parliament became publicly available. We find that members of the conservative party (CDU/CSU) and the liberal party (FDP) are more likely to work for firms than members of left-wing parties (SPD and The L...

Do Brokers Misallocate Customer Trades? Evidence from Futures Markets JEL Classification number: G12, G13, G18 In the context of futures markets, we study whether brokers allocate more favorable trades to their own accounts, and less favorable trades to their customers. We find that, within a thirty minute trading bracket, brokers on average buy at a lower price and sell at a higher price for t...

ABSTRACT Complex disclosures have long been a major source of borrowers’ poor understanding mortgages. We examine the effect simplifying mortgage in difference-in-differences design around significant disclosure rule mandated by Consumer Financial Protection Bureau 2015. find that inexperienced borrowers (first-time home buyers) pay significantly lower interest rates after regulation than exper...

We evaluate the effect that payday loan access has on credit and labor market outcomes of individuals in the U.S. Army. Along with the conditional random assignment of servicemembers to different states, we employ three identification strategies using cross-sectional variation in state policies, within-state variation in payday lending laws over time, and difference-indifference analysis using ...

Article history: Received 3 April 2014 Accepted 13 November 2014 Available online 20 November 2014 This paper examines the effect of insider trading restrictions on corporate risk-taking. Using a cross-country sample of 38 countries over the 1990 to 2003 period, we find that corporate risk-taking is positively related to insider trading restrictions. This finding is robust to alternative regres...

Financial institutions around theworld expected themillennium date change (Y2K) to cause an aggregate liquidity shortage. Responding to the concern, the Federal Reserve Bank of New York auctioned Y2K options to primary dealers. The options gave the dealers the right to borrow from the Fed at a predetermined interest rate. Using the implied volatilities of Y2K options and the on/off-the-run spre...

A life-cycle model with equilibrium default in which consumers with and without temptation coexist is constructed to evaluate the 2005 bankruptcy law reform and other counterfactual reforms. The calibrated model indicates that the 2005 bankruptcy reform achieves its goal of reducing the number of bankruptcy filings, as seen in the data, but at the cost of loss in social welfare. The creditor-fr...