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, regulators bail out creditors.
Anticipation of this generates multiple equilibria, including one with systemic risk in which
banks use excessive leverage to fund co
rrelated, inefficiently risky loans. Limiting leverage and resolving both moral hazards?insufficient loan monitoring and asset substitution?requires a novel two-tiered capital requirement, including a ?special capital account? that is unavailable to creditors upon failure.
This study provides an economic analysis of the determinants and consequences of corporate social responsibility (CSR) and sustainability reporting. To frame our analysis, we consider a widespread mandatory adoption of CSR reporting standards in...Read more
How special is Centros? This contribution places Centros in internal market law. It starts by
turning the judgment on its head and imagines an alternative Centros: the judgment that the
Danish authorities...Read more
Comparative company law is at once very old and very modern. It is very old
because ever since companies and company laws first existed, trade has not
stopped at the frontiers of countries and states. The persons concerned, ...Read more
The European Court of Justice’s landmark decision in Centros was heralded as creating the preconditions for a vibrant market for incorporations in the EU. In practice, however, today’s corporate landscape in Europe differs little from...Read more