The aim of this paper is to analyze the shadow economy in the Spanish Autonomous Communities. In so doing, we employ the Currency Demand Approach to analyze the 1987–2010 period. The results show that the size of the shadow economy ranges from 18% to 30% of regional GDP and an approximate mean value of 25% for the entire territory. The Personal Income Tax has the greatest impact on the shadow e...

Article history: Received 25 May 2012 Received in revised form 2 April 2013 Accepted 26 May 2013 Available online 5 June 2013 Using data for publicly listed commercial banks and bank holding companies around the world, I investigate the disciplinary effect of subordinated debt on bank risk taking in the period 2002– 2008. In addition, I examinewhether this effect depends on national bank regula...

We demonstrate that legislation has a simple, yet previously undetected impact on stock prices. Exploiting the voting record of legislators whose constituents are the affected industries, we show that the votes of these “interested” legislators capture important information seemingly ignored by the market. A long-short portfolio based on these legislators’ views earns abnormal returns of over 9...

This paper examines the economic consequences of tightening auditing standards. We recognize that both auditors’ incentives and expertise are relevant for audit effectiveness. On one hand, tighter auditing standards counter the misbehavior of rogue auditors. On the other hand, tighter standards restrict auditors’exercise of professional judgement, leads to auditors’compliance mentality, and red...

We assess the impact of institutions on Chinese firms’ corporate investment in an investment Euler equation framework. We allow the variables measuring institutions to affect the rate at which firm managers discount future investment payoffs. Applying generalized method of moments estimators to large samples of Chinese firms, we estimate the stochastic discount rates derived from actual investm...

This paper characterizes the optimal linear financial transaction tax in an equilibrium model of competitive financial markets. As long as investors hold heterogeneous beliefs about the returns of assets in fixed supply and the planner calculates welfare using any single belief, we expect the optimal tax to be positive, even when a fraction of trading is fundamental. Strikingly, the optimal tax...

Assumptions about the dynamic and distributional behavior of risk factors are crucial for the construction of optimal portfolios and for risk assessment. Although asset returns are generally characterized by conditionally varying volatilities and fat tails, the normal distribution with constant variance continues to be the standard framework in portfolio management. Here we propose a practical ...

Article history: Received 6 August 2014 Received in revised form 14 November 2015 Accepted 16 November 2015 Available online 26 November 2015 This paper examines the incentives of national regulators to coordinate capital adequacy requirements in the presence of systemic risk in global financial markets. In a two-country model, correlated asset fire sales by banks generate systemic risk across ...

Article history: Received 3 April 2014 Accepted 13 November 2014 Available online 20 November 2014 This paper examines the effect of insider trading restrictions on corporate risk-taking. Using a cross-country sample of 38 countries over the 1990 to 2003 period, we find that corporate risk-taking is positively related to insider trading restrictions. This finding is robust to alternative regres...

A life-cycle model with equilibrium default in which consumers with and without temptation coexist is constructed to evaluate the 2005 bankruptcy law reform and other counterfactual reforms. The calibrated model indicates that the 2005 bankruptcy reform achieves its goal of reducing the number of bankruptcy filings, as seen in the data, but at the cost of loss in social welfare. The creditor-fr...