Why do banks choose to finance with equity?
A majority of U.S. banks between 1973 and 2012 held equity capital significantly beyond the required minimum. We study the risk-return tradeoff in connection with a bank’s capital structure, and [...]
Bank liquidity creation, monetary policy, and financial crises
This paper examines the interplay among bank liquidity creation (which incorporates all bank on- and off-balance sheet activities), monetary policy, and financial crises. We find that: (1) high liquidity creation [...]
Debt-overhang banking crises: Detecting and preventing systemic risk
This paper shows how the debt-overhang distortion on bank lending can generate a self-fulfilling-expectations banking crisis accompanied by a plunge in the value of banks’ assets and a contraction of [...]
A Skeptical View of Financialized Corporate Governance
Financialized corporate governance as commonly practiced causes significant inefficiencies and harm. Corporations and governments routinely fail to design and enforce rules that reduce the opacity of corporations, create effective commitments [...]
Private Equity and Financial Fragility during the Crisis
Do private equity firms contribute to financial fragility during economic crises? We find that during the 2008 financial crisis, PE-backed companies increased investments relative to their peers, while also experiencing [...]
Loan Prospecting and the Loss of Soft Information
We study a controlled experiment in which a bank’s loan officers were incentivized based on originated loan volume to encourage prospecting for new business. While treated loan officers did attract [...]
Debt and Financial Vulnerability on the Verge of Retirement
We analyze older individuals’ debt and financial vulnerability using data from the Health and Retirement Study (HRS) and the National Financial Capability Study (NFCS). Specifically, in the HRS we examine [...]
Which Banks Recover from Large Adverse Schocks?
We analyze the fate of 110 Italian banks that experienced abrupt drops in profitability, from which about 1/3 recover. Recovery depends primarily on post-shock adjustments made by the banks, particularly [...]
Credit Growth and the Financial Crisis: A New Narrative
A broadly accepted view contends that the 2007-09 financial crisis in the U.S. was caused by an expansion in the supply of credit to subprime borrowers during the 2001- 2006 [...]
The evolution of the Federal Reserve’s Term Auction Facility and FDIC-insured bank utilization
The Term Auction Facility (TAF) was designed by the Federal Reserve during the financial crisis to inject emergency short-term funds into banks, as a supplement to the lender of last [...]