We develop a theory of optimal bank leverage in which the benefit of debt in inducing
loan monitoring is balanced against the benefit of equity in attenuating risk-shifting.
However, faced with socially-costly correlated bank failures...Read more
We analyze a comprehensive sample of more than 10,000 U.S. stocks in the OTC market. As little is known about this market, we first characterize OTC firms by trading venue and provide evidence on survival, success, frequency of venue changes,...Read more
In recent years, reporting under International Financial Reporting Standards (IFRS) became mandatory in many countries. The capital-market effects around this change have been extensively studied, but their sources are not yet well understood....Read more
Systemic risk poses a classic ?public goods? problem. All nations want systemic stability, but most would prefer that other nations pay for it, allowing them to ?free ride.? Moreover, because global financial institutions can park their higher...Read more
This article explores how issuer liability reallocates fraud risk and how risk allocation may reduce the incidence of fraud. In the US, the apparent absence of individual liability of officeholders and insufficient monitoring by insurers...Read more
Financial crises impose large and persistent social costs, making banking stability an important regulatory goal. This paper provides a review of the central issues related to the role bank capital plays in financial stability and the prudential...Read more
In consequence of the three ECJ cases in Centros (1999), Überseering (2002), and
Inspire Art (2003), EU member states can no longer effectively apply the real seat theory to companies from other Member States or take other measures to avoid...Read more
?Benefit-cost analysis? as applied to financial regulation is a serious category mistake
that has the potential to stymie regulation aimed at the reduction of systemic risk in
favor of privileging a status quo that we know is unstable...Read more
Some members of Congress, the D.C. Circuit, and legal academia are promoting
a particular, abstract form of cost-benefit analysis for financial regulation: judicially
enforced quantification. How would CBA work in practice, if applied...Read more
This paper examines the economic effects of changes in securities regulation. We analyze two key directives in the European Union (EU) that tightened market abuse and transparency regulation. All EU member states were required to adopt these two...Read more
In the wake of the global financial crisis, attention has often focused on whether incentives generated by bank executives? compensation programs led to excessive risk-taking. Post-crisis, compensation reform proposals have taken broadly three...Read more
Compared to the worldwide financial carnage that followed the Subprime Crisis of 2007-2008, it may seem of small consequence that it is also said to have demonstrated the bankruptcy of an academic financial institution: the Efficient Capital...Read more