This paper explains why banks derive a benefit from being highly interconnected. We show that when banks are protected by government guarantees they can significantly increase their expected returns by channeling funds ...

This paper proposes a new regulatory approach that implements capital requirements contingent on executive incentive schemes. We argue that excessive risk-taking in the financial sector originates from the shareholder moral ...

This paper studies how disruptions to personal sources of financing, aside from commercial lending supply shocks, impair the survival and growth of small businesses. Entrepreneurs holding deposit accounts at retail banking ...

We show that property damages from weather-related natural disasters significantly weaken the stability of banks with business activities in affected regions, as reflected in lower z-scores, higher probabilities of default, ...

This paper analyzes the bail-in tool under the BRRD and predicts that it will not reach its policy objective. To make this argument, this paper first describes the policy rationale that calls for mandatory private sector ...

The bail-in tool as implemented in the European bank resolution framework suffers from severe shortcomings. To some extent, the regulatory framework can remove the impediments to the desirable incentive effect of private ...

Departing from the principle of absolute priority, CoCo bonds are particularly exposed to bank losses despite not having ownership rights. This paper shows the link between adverse CoCo design and their yields, confirming ...

We derive three testable predictions from a bank-P2P lender model of competition: (i) P2P lending grows when some banks are faced with exogenously higher regulatory costs, (ii) P2P loans are riskier than bank loans; and ...

This paper examines bargaining as a mechanism to resolve information problems. To guide the analysis, I develop a parsimonious model of a credit negotiation between a bank and firms with varying levels of impatience. In ...

We use minutes from 17,000 financial advisory sessions and corresponding client portfolio data to study how client involvement affects advisor recommendations and portfolio outcomes. We find that advisors confronted with ...