We propose a set of consistency conditions that frontier efficiency measures should meet to be most useful for regulatory analysis or other purposes. The efficiency estimates should be consistent in their efficiency levels, rankings, and identification of best and worst firms, consistent over time and with competitive conditions in the market, and consistent with standard nonfrontier measures o...

Resampling implementation of a stress-scenario approach to estimating portfolio default loss distributions is proposed as the basis for estimates of the appropriate absolute level of economic capital allocations for portfolio credit risk. Estimates are presented for stress scenarios of varying severity and implications of different time horizons are analyzed. Results for a numeraire portfolio a...

We study the dynamics of market entry following mergers and acquisitions (M&As), and the behavior of recent entrants in supplying output that might be withdrawn by the consolidating firms. The data, drawn from the banking industry, suggest that M&As are associated with subsequent increases in the probability of entry. The estimates suggest that M&As explain more than 20% of entry in metropolita...

Increasing market discipline has emerged as a major policy issue for banking regulators. The most prominent proposals for increasing market discipline would require banks to issue subordinated debt to the public. This paper explores the fundamental rationale behind mandatory subordinated debt proposals and their advantages and disadvantages. Our analysis indicates that a subordinated debt requi...

In a general equilibrium model with risk neutral and risk averse agents, we show that if banks issue both demand deposits and equity, then free banking is run-proof and ecient. In particular, we obtain the ®rst best insurance solution if there is adequate risk neutral capital. If sucient risk neutral capital is unavailable, then a partial suspension of convertibility is optimal. In general, t...

There is a wide cross-country variation in the institutional structure of bank failure resolution, including the role of the deposit insurer. We use quantitative analysis for 57 countries and discussion of specific country cases to illustrate this variation. Using data for over 1,700 banks across 57 countries, we show that banks in countries where the deposit insurer has the responsibility of i...

Developing high yielding and stable genotypes for wide and specific adaptation is important in wheat (Triticum aestivum L.) production. The objective of this study was to exploit the gains from genotype by environment interaction for increased bread wheat production in eastern Africa. Thirty-three advanced bread wheat lines, along with two check varieties (Danda’a and Hidasse) were evaluated at...

We show that municipalities’ credit constraints can have important effects on local economies through a ratings channel. We identify these effects by exploiting exogenous variation on U.S. municipal bond ratings due to Moody’s recalibration of its ratings scale in 2010. We find that local governments increase expenditures and employment due to an expansion of their debt capacity following a rat...

We examine the stock option exercise decisions of over 50,000 employees at seven corporations to provide evidence on the distribution of price-relevant non-public information among employees. When option exercise (adjusted for other factors affecting exercise) is low, stock returns in the coming 6 months are 10% higher than when option exercise is high. The exercise decisions of relatively juni...

Investment banks legally pursue supposedly price stabilizing activities in the aftermarket of IPOs. We model the offering procedure as a signaling game and analyze how the possibility of potentially profitable trading in the aftermarket influences pricing decisions by investment banks. When maximizing the sum of both the gross spread of the offer revenue and profits from aftermarket trading, in...