I analyze banks’ incentives to acquire expertise in judging the credit-worthiness of borrowers in an industry with uncertain business conditions. The optimal industrial organization of bank lending features several banks with industry expertise, as well as a competitive fringe of banks without such expertise. The analysis provides a foundation for analyzing the relative merits of focus vs. dive...

Traditional models of bank runs do not allow for herding e¤ects, because in these models withdrawal decisions are assumed to be made simultaneously. I extend the banking model to allow a depositor to choose his withdrawal time. When he withdraws depends on his consumption type (patient or impatient), his private, noisy signal about the quality of the bank’s portfolio, and the withdrawal histori...

The purpose of this paper is to examine the financing behaviour of Dutch corporations and its impact on firm performance. First, I present some stylised facts of corporate financing in the Netherlands. I show how the Dutch financial system differs from other major financial systems. Second, I analyse the valuation effect of different types of security offerings made by Dutch quoted firms. An ev...

This paper develops a refinance model that provides pertinent information for investors about refinancing their mortgage. We discuss the input variables and how to compute the breakeven number of months when deciding to refinance a mortgage. We incorporate the interest rate tax effects that are normally ignored by investors when making their refinancing decision. We also compute the net present...

The principal driving force in the development of the financial system of pre-industrial Europe was not lending per se, but payments. Trade among strangers required the development of methods of payment that did not require mutual acquaintance and trust. The two principal financial innovations of pre-industrial Europe—the deposit bank and the bill of exchange—evolved to address this need. Lendi...

We examine the roles of idiosyncratic and systemic funding liquidity risks in bank failures. We estimate a discrete-time hazard model of bank failure using data of U.S. commercial banks between 1985 and 2004, and examine its out-of-sample forecasting performance between 2005 and 2011. The out-of-sample performance comparison shows this model outperforms typical bank failure prediction models. W...

The majority of the poor lack access to bank accounts and have to use costly informal savings mechanisms. Using a field experiment, I randomly gave access to simple bank accounts with no fees at local bank branches to a large sample of female household heads in Nepal. Results show that there is untapped demand for savings accounts and that the poor do save. Access to the savings accounts increa...

We study experimental coordination games to examine through which transmission channels, and under which information conditions, a panic-based depositor-run at one bank may trigger a panic-based depositor-run at another bank. We find that withdrawals at one bank trigger withdrawals at another bank by increasing players’ beliefs that other depositors in their own bank will withdraw, making them ...

Insider trading problems relating to Japanese seasoned equity offerings (SEO) have attracted the attention of many investors. The purpose of this paper is to examine SEO insider problem and to provide suggestions to solve the problem. We have several findings. First, all four of the SEO insider firms experienced negative abnormal stock returns and high trading volume just two weeks before SEO a...

This paper explores the role of diversification and size in protecting information. We present a simple two period credit market with a sophisticated lender faced with competitors who free ride on his screening activity. Absent commitment problems, the lender funds one borrower and exerts optimal evaluation. When borrowers cannot commit to a long term relationship, the free riding problem is re...