We study how a government should optimally disclose information about banks’ assets during a financial crisis. The government can also use its resources to stop runs and unfreeze credit markets. Disclosure improves welfare by reducing adverse selection, but it can also create runs on weak banks. A credible fiscal backstop mitigates these risks and allows the government to pursue efficient but r...

The banking industry has been a pioneer in adopting electronic markets with exchanges, clearinghouses, and multilateral trading facilities having become the backbone of today’s globally integrated financial transactions. While most banks use the services of these electronic markets to handle interbank processes, they still strive for bilateral relations in the field of customer-facing processes...

Financial misrepresentation has serious, detrimental economic and social impacts. We present hypotheses regarding the factors that incline a firm to misrepresent its finances. Using a matched sample design, we find that three factors increase a firm’s probability of misrepresenting its financial position: performance below its industry’s average performance, performance significantly above its ...

Large global financial imbalances need not be the harbinger of a world financial crash as many authors believe. Instead, we show that large and persistent global imbalances can be the outcome of financial integration when countries have different financial markets characteristics. In particular, countries with more advanced financial markets accumulate foreign liabilities vis-a-vis countries wi...

In the broad literature of corporate risk management classic models of optimal hedging assume a one-period hedging decision, and therefore no financing need arises to maintain the hedge position. The multi-period models are usually based on the assumption of no liquidity constraints, and accordingly the eventual financing need can always be met from the market. As a consequence of the recent cr...

In assessing financial stability, the emphasis is on downside risks rather than the most likely outcome. While the entire distribution of indicators of company financial health is reviewed, the focus is on those companies in the tails, since they may be more exposed to financial distress. Measures of central tendency (mean, median, mode, etc) taken across a group of highly heterogeneous compani...