dunnettreader + capital_markets   293

Flores-Maciss
What determines when states adopt war taxes to finance the cost of conflict? We address this question with a study of war taxes in the United States between 1789 and 2010. Using logit estimation of the determinants of war taxes, an analysis of roll-call votes on war tax legislation, and a historical case study of the Civil War, we provide evidence that partisan fiscal differences account whether the United States finances its conflicts through war taxes or opts for alternatives such as borrowing or expanding the money supply. Because the fiscal policies implemented to raise the revenues for war have considerable and often enduring redistributive impacts, war finance—in particular, war taxation—becomes a high-stakes political opportunity to advance the fiscal interests of core constituencies. Insofar as the alternatives to taxation shroud the actual costs of war, the findings have important implications for democratic accountability and the conduct of conflict. - Downloaded via iphone
US_history  downloaded  politics-and-money  US_military  deficit_finance  sovereign_debt  business_cycles  international_finance  fiscal_policy  Congress  US_foreign_policy  capital_markets  fiscal-military_state  political_history  article  political_economy  monetary_policy  taxes  US_politics  accountability  financial_system  redistribution  business-and-politics 
july 2017 by dunnettreader
Admati et al - The Leverage Ratchet Effect (WP 2016) | Stanford Graduate School of Business
The Leverage Ratchet Effect
By Anat R. Admati, Peter M. DeMarzo, Martin F. Hellwig, Paul Pfleiderer
October 11,2016Working Paper No. 3029
Economics, Corporate Governance
Firms’ inability to commit to future funding choices has profound consequences for capital structure dynamics. With debt in place, shareholders pervasively resist leverage reductions no matter how much such reductions may enhance firm value. Shareholders would instead choose to increase leverage even if debt levels are already high and new debt must be junior to existing debt. These asymmetric forces in leverage adjustments, which we call the leverage ratchet effect, cause equilibrium leverage outcomes to be history-dependent. When forced to reduce leverage, shareholders are biased toward selling assets relative to potentially more efficient alternatives such as pure recapitalizations.

Keywordscapital structure, leverage, agency costs of debt, dynamic capital structure, tradeoff theory of capital structure, capital regulation, bank equity, debt overhang, under-investment, recapitalization, deleveraging, bankruptcy costs
finance_capital  equity-corporate  downloaded  capital_markets  debt-seniority  debt-restructuring  corporate_governance  recapitalization  risk_capital  debt-overhang  leverage  equity  equity_markets  corporate_finance  debt 
april 2017 by dunnettreader
The Leverage Ratchet Effect by Anat R. Admati, Peter M. DeMarzo, Martin F. Hellwig, Paul C. Pfleiderer (October 2016) :: SSRN
Anat R. Admati, Stanford Graduate School of Business; Peter M. DeMarzo. Stanford Graduate School of Business, NBER; Martin F. Hellwig, Max Planck Institute for Research on Collective Goods, U. of Bonn - Dep of Econ; Paul C. Pfleiderer, Stanford Graduate School of Business -- Max Planck - Collective Goods Bonn 2013/13
credit_booms  recapitalization  corporate_finance  debt-overhang  debt-seniority  leverage  banking  financial_crisis  debt-restructuring  downloaded  capital_markets  financial_regulation  equity-corporate  paper  debt 
november 2016 by dunnettreader
Ricardo J. Caballero, Alp Simsek - A Model of Fickle Capital Flows and Retrenchment: Global Liquidity Creation and Reach for Safety and Yield - NBER - October 2016
Gross capital flows are very large and highly cyclical. They are a central aspect of global liquidity creation and destruction. They also exhibit rich internal dynamics that shape fluctuations in domestic liquidity, such as the fickleness of foreign capital inflows and the retrenchment of domestic capital outflows during crises. In this paper we provide a model that builds on these observations to address some of the main questions and concerns in the capital flows literature. Within this model, we find that for symmetric economies, the liquidity provision aspect of capital flows vastly outweighs their fickleness cost, so that taxing capital flows, while could prove useful for a country in isolation, backfires as a global equilibrium outcome. However, if the system is heterogeneous and includes economies with abundant (DM) and with limited (EM) natural domestic liquidity, there can be scenarios when global liquidity uncertainty is high and EM's reach for safety can destabilize DMs, as well as risk-on scenarios in which DM's reach for yield can destabilize EMs.
paper  paywall  NBER  capital_flows  capital_markets  yield  liquidity  emerging_markets  capital_controls  financial_stability  international_finance 
october 2016 by dunnettreader
Gary Gorton
Mobile Collateral versus Immobile Collateral
Gary Gorton, Tyler Muir
NBER Working Paper No. 22619
Issued in September 2016
NBER Program(s):   AP   CF   DAE   EFG   ME
In the face of the Lucas Critique, economic history can be used to evaluate policy. We use the experience of the U.S. National Banking Era to evaluate the most important bank regulation to emerge from the financial crisis, the Bank for International Settlement's liquidity coverage ratio (LCR) which requires that (net) short-term (uninsured) bank debt (e.g. repo) be backed one-for-one with U.S. Treasuries (or other high quality bonds). The rule is narrow banking. The experience of the U.S. National Banking Era, which also required that bank short-term debt be backed by Treasury debt one-for-one, suggests that the LCR is unlikely to reduce financial fragility and may increase it.
NBFI  NBER  financial_stability  risk_management  collateral  financial_economics  capital_markets  bad_regulation  leverage  financial_system  risk-systemic  paywall  money_market  banking  paper  financial_regulation  BIS 
october 2016 by dunnettreader
Joseph Joyce - Capital Flows and Financial Crises | Capital Ebbs and Flows - Oct 2016
Prof at Wellesley. The impact of capital flows on the incidence of financial crises has been recognized since the Asian crisis of 1997-98. Inflows before the crisis contributed to…
Pretty much my position re Chile's controls in 1990s - FDI good, portfolio vulnerable to hot money, bad, especially foreign-denominated debt, but also bank deposits attracted by interest rates but easily reversed. But they're finding that it's not just the flows that are destabilizing -- exchange rate appreciation comes with foreign capital buying debt assets as well. So much for developing local bond markets? -- See links to papers, tracking not just macro level but B-schools looking at firm-level incentives, who goes in for leverage, etc.
economic_history  financial_crisis  financialization  emerging_markets  capital_flows  FDI  capital_markets  sovereign_debt  FX-misalignment  FX  economic_policy  from instapaper
october 2016 by dunnettreader
Vitor Gaspar - The Making of a Continental Financial System; Lessons for Europe from Early American History (2014) IMF working paper
Alexander Hamilton was the first U.S. Treasury Secretary from 1789 to 1795. When he started, the Federal Government was in default. During his tenure, U.S. Treasuries became the ultimate safe asset. He successfully managed expectations, achieved debt service reduction, and stabilized financial panics. He delivered sound public finances and financial stability. In the end, the U.S. possessed a modern financial system able to finance innovation and growth. At a time when Europe is working its way out of the sovereign debt crisis and implementing Banking Union and Financial Union, it is worthwhile to search for lessons from early U.S. history. - downloaded via iPhone to DBOX
paper  capital_markets  18thC  risk_assessment  European_integration  US_economy  sovereign_debt  economic_history  market_integration  Eurozone  political_economy  Germany-Eurozone  governance-regional  asset_prices  downloaded  US_history  Hamilton  federalism  regional_blocs 
october 2016 by dunnettreader
José Azar, Martin C. Schmalz, Isabel Tecu - Anti-Competitive Effects of Common Ownership :: SSRN July 5, 2016
José Azar , University of Navarra, IESE Business School
Martin C. Schmalz , University of Michigan, Stephen M. Ross School of Business
Isabel Tecu , Charles River Associates (CRA)
Ross School of Business Paper No. 1235
Many natural competitors are jointly held by a small set of large diversified institutional investors. In the US airline industry, taking common ownership into account implies increases in market concentration that are 10 times larger than what is “presumed likely to enhance market power” by antitrust authorities. We use within-route variation over time to identify a positive effect of common ownership on ticket prices. A panel-IV strategy that exploits BlackRock's acquisition of Barclays Global Investors confirms these results. We conclude that a hidden social cost -- reduced product market competition -- accompanies the private benefits of diversification and good governance. -- Pages 61
Keywords: Competition, Ownership, Diversification, Pricing, Antitrust, Governance, Product Market
Downloaded via iPhone to DBOX
industry_consolidation  corporate_ownership  SSRN  interlocking_holdings  industry_structure  corporate_governance  conflict_of_interest  downloaded  rent-seeking  paper  institutional_investors  capital_markets  anti-competive_behavior  competition  cross-holdings 
august 2016 by dunnettreader
Pedro Bordalo, Katherine Coffman, Nicola Gennaioli & Andrei Shleifer - “Stereotypes” (Forthcoming 2016) Quarterly Journal of Economics
Citation:
Bordalo, Pedro, Katherine Coffman, Nicola Gennaioli, and Andrei Shleifer. Forthcoming. “Stereotypes.” Quarterly Journal of Economics. -- We present a model of stereotypes based on Kahneman and Tversky’s representative-ness heuristic. A decision maker assesses a target group by overweighting its representative types, defined as the types that occur more frequently in that group than in a baseline ref-erence group. Stereotypes formed in this way contain a “kernel of truth”: they are rooted in true di˙erences between groups. Because stereotypes focus on di˙erences, they cause belief distortions, particularly when groups are similar. Stereotypes are also context dependent: beliefs about a group depend on the characteristics of the reference group. In line with our predictions, beliefs in the lab about abstract groups and beliefs in the field about political groups are context dependent and distorted in the direction of representative types. -- downloaded via iPhone to DBOX
behavioral_economics  cognitive_bias  credit_crunch  financial_system  article  heuristics  bubbles  credit_booms  downloaded  cognition  investors  capital_markets 
august 2016 by dunnettreader
Bordalo, Gennaioli and Shleifer - Diagnostic Expectations and Credit Cycles - WP June 2016 version
Bordalo, Pedro, Nicola Gennaioli, and Andrei Shleifer. Working Paper. “Diagnostic Expectations and Credit Cycles”.Abstract
We present a model of credit cycles arising from diagnostic expectations – a belief formation mechanism based on Kahneman and Tversky’s (1972) representativeness heuristic. In this formulation, when forming their beliefs agents overweight future outcomes that have become more likely in light of incoming data. The model reconciles extrapolation and neglect of risk in a unified framework. Diagnostic expectations are forward looking, and as such are immune to the Lucas critique and nest rational expectations as a special case. In our model of credit cycles, credit spreads are excessively volatile, over-react to news, and are subject to predictable reversals. These dynamics can account for several features of credit cycles and macroeconomic volatility
PDF, revised June 2016 -- downloaded via iPhone to DBOX
financial_system  bubbles  creditors  investors  leverage  credit_crunch  paper  capital_markets  debt_crisis  consumer_demand  debt-overhang  banking  reallocation-labor  demand-side  credit_booms  downloaded  debt-restructuring  reallocation-capital  financial_crisis  investment 
august 2016 by dunnettreader
Gennaioli, Nicola, Andrei Shleifer and Robert Vishny - Neglected Risks: The Psychology of Financial Crises (2015) | Andrei Shleifer - pre-pub pdf
We model a financial market in which investor beliefs are shaped by representativeness. Investors overreact to a series of good news, because such a series is representative of a good state. A few bad news do not change investor minds because the good state is still representative, but enough bad news leads to a radical change in beliefs and a financial crisis. The model generates debt over-issuance, "this time is different" beliefs, neglect of tail risks, under- and over-reaction to information, boom-bust cycles, and excess volatility of prices in a unified psychological model of expectations.
Citation
Gennaioli, Nicola, Andrei Shleifer and Robert Vishny. 2015. "Neglected Risks: The Psychology of Financial Crises." American Economic Review, 105(5): 310-14.
DOI: 10.1257/aer.p20151091
Downloaded pre-pub pdf via iPhone to DBOX
financial_crisis  investors  Minsky  investment  credit_booms  financial_system  downloaded  article  capital_markets 
august 2016 by dunnettreader
Iryna Stewen & Mathias Hoffmann - Holes in the Dike: the global savings glut, US house prices & the long shadow of banking deregulation (2015 wp)
Verein für Socialpolitik / German Economic Association in its series Annual Conference 2015 (Muenster): Economic Development - Theory and Policy with number 112834. -- Abstract -- We explore empirically how capital inflows into the US and financial deregulation within the United States interacted in driving the run-up (and subsequent decline) in US housing prices over the period 1990-2010. To obtain an ex ante measure of financial liberalization, we focus on the history of interstate-banking deregulation during the 1980s, i.e. prior to the large net capital inflows into the US from China and other emerging economies. Our results suggest a long shadow of deregulation: in states that opened their banking markets to out-of-state banks earlier, house prices were more sensitive to capital inflows. We provide evidence that global imbalances were a major positive funding shock for US wide banks: different from local banks, these banks held a geographically diversified portfolio of mortgages which allowed them to tap the global demand for safe assets by issuing private-label safe assets backed by the country-wide US housing market. This, in turn, allowed them to expand mortgage lending and lower interest rates, driving up housing prices. -- downloaded via iPhone to DBOX
banking  financial_crisis  deregulation  US_economy  downloaded  financial_regulation  global_imbalance  capital_markets  post-Cold_War  financial_system  interstate_banking  savings  house_prices  securitization  financial_innovation  interest_rates  mortgages  international_finance  capital_flows  community_banks  paper  21stC  economic_history  competition-interstate  NBFI 
august 2016 by dunnettreader
Dewatripont, M. and Rochet, J., Tirole, J. - Balancing the Banks: Global Lessons from the Financial Crisis (orig 2010) - Princeton University Press
The financial crisis that began in 2007 in the United States swept the world, producing substantial bank failures and forcing unprecedented state aid for the crippled global financial system. Bringing together three leading financial economists to provide an international perspective, Balancing the Banks draws critical lessons from the causes of the crisis and proposes important regulatory reforms, including sound guidelines for the ways in which distressed banks might be dealt with in the future.

While some recent policy moves go in the right direction, others, the book argues, are not sufficient to prevent another crisis. The authors show the necessity of an adaptive prudential regulatory system that can better address financial innovation. Stressing the numerous and complex challenges faced by politicians, finance professionals, and regulators, and calling for reinforced international coordination (for example, in the treatment of distressed banks), the authors put forth a number of principles to deal with issues regarding the economic incentives of financial institutions, the impact of economic shocks, and the role of political constraints.

Offering a global perspective, Balancing the Banks should be read by anyone concerned with solving the current crisis and preventing another such calamity in the future.
Downloaded Chapters 1 & 2 to Tab S2
books  kindle-available  downloaded  financial_system  financial_regulation  financial_crisis  banking  bank_runs  shadow_banking  capital_markets  capital_flows  capital_adequacy  liquidity  risk_management  incentives-distortions  incentives  international_finance  global_governance  regulatory_arbitrage  regulatory_avoidance  regulation-costs  regulation-enforcement  regulation-harmonization  regulation 
august 2016 by dunnettreader
D. Georgarakos
Trust, Sociability, and Stock Market Participation
Dimitris Georgarakos1 and
Giacomo Pasini2
1Goethe University Frankfurt and Center for Financial Studies
2Venice University
Review of Finance (2011) 15 (4): 693-725. doi: 10.1093/rof/rfr028 -- This article investigates the importance of both trust and sociability for stock market participation and for differences in stockholding across Europe. We estimate significant effects for the two, and find that sociability can partly balance the discouragement effect on stockholding induced by low regional prevailing trust. We test for exogeneity of trust and sociability indicators using variation in history of political institutions and in frequency of contacts with grandchildren, respectively. Moreover, the effect of trust is stronger in countries with limited participation and low average trust, offering an explanation for the remarkably low stockholding rates of the wealthy living therein. - downloaded via iPhone to DBOX
trust  sociability  investors  financial_system  article  capital_markets  investment  behavioral_economics  downloaded 
july 2016 by dunnettreader
Pedro Bordalo, Nicola Gennaioli, Andrei Shleifer - Diagnostic Expectations and Credit Cycles | NBER - May 2016
NBER Working Paper No. 22266, Issued in May 2016 -- We present a model of credit cycles arising from diagnostic expectations – a belief formation mechanism based on Kahneman and Tversky’s (1972) representativeness heuristic. In this formulation, when forming their beliefs agents overweight future outcomes that have become more likely in light of incoming data. The model reconciles extrapolation and neglect of risk in a unified framework. Diagnostic expectations are forward looking, and as such are immune to the Lucas critique and nest rational expectations as a special case. In our model of credit cycles, credit spreads are excessively volatile, over-react to news, and are subject to predictable reversals. These dynamics can account for several features of credit cycles and macroeconomic volatility. - via DeLong
paper  paywall  business_cycles  Minsky  RBC  financial_system  capital_markets  credit  credit_booms  credit_crunch  rational_expectations  heuristics  rationality-economics  rational_choice  financial_stability  volatility  risk_assessment  interest_rates  spreads  Kindleberger 
may 2016 by dunnettreader
Perry Mehring - Shadow banking’s enduring perils - INET - May 2016
In the immediate aftermath of the global financial crisis, most people thought that shadow banking was all in the past, and good riddance! Today, however, it is…
Instapaper  financial_system  capital_markets  money_market  shadow_banking  banking  leverage  financial_regulation  from instapaper
may 2016 by dunnettreader
Matt Levine - It Costs Money to Sell a Lot of Bonds - Bloomberg View - April 2016
One basic fact about markets is that, if there are 1,000 widgets in the world, and the "fair" price of a widget is $100, and you need to sell 200 widgets in an…
Instapaper  capital_markets  bond_markets  intermediation  markets-structure  liquidity  investment  institutional_investors  market-makers  market-size_of  corporate_finance  equity_markets  from instapaper
april 2016 by dunnettreader
Pari Passu Closing Ceremonies Quote Parade - Credit Slips - Feb 2016
Lifting the Argentina injunction - the initial rationale(s) and the rationale(s) for what's changed for all the (old and new "me too" players) that changes the calculation of who's entitled to what equitable relief - like, what took so long?
Pocket  international_finance  capital_markets  sovereign_debt  default  international_law  equitable_relief  judiciary  common_law  common_law-equity  transnational_power  from pocket
february 2016 by dunnettreader
O Blanchard, J D Ostry, AR Ghosh, M Chamon - Macro effects of capital inflows: Capital type matters | VOX, CEPR’s Policy Portal - 26 November 2015
Some scholars view capital inflows as contractionary, but many policymakers view them as expansionary. Evidence supports the policymakers. This column introduces an analytic framework that knits together the two views. For a given policy rate, bond inflows lead to currency appreciation and are contractionary, while non-bond inflows lead to an appreciation but also to a decrease in the cost of borrowing, and thus may be expansionary.
paper  capital_flows  emerging_markets  capital_markets  monetary_policy  interest_rates  FX-rate_management  banking  FDI  portfolio  _investment  investors 
november 2015 by dunnettreader
Mike Konczal, J.W. Mason, Amanda Page-Hoongrajok - Ending Short-Termism: An Investment Agenda for Growth - Roosevelt Institute - Nov 2015
The first part of this agenda will directly counter several of the specific trends known to increase short-termism. It will include ideas that are broadly applicable across industries, such as policies to address skyrocketing CEO pay, as well as more targeted solutions. A policy agenda to address corporate short-termism requires a comprehensive approach focused on building countervailing power, which is addressed in the second part of our proposal. The forces that push firms toward shorttermism will persist and find new ways to exert power, but the reforms outlined in this paper embrace wide-scale, long-term changes, such as granting workers power on boards, designed to attract long-term stakeholders. The agenda also includes practical, simple policy changes for regulators.The third part of our agenda contains solutions that point to a new role for the state. Taxes and full employment are two obvious and necessary ways of checking short-termism, and if companies are less interested in investment, government needs to fill in that gap, whether by providing high-speed cable or funding basic research. -- downloaded pdf to Note
US_economy  investment  investors  capital_markets  corporate_finance  corporate_governance  shareholder_value  shareholders  short-termism  financial_system  equity_markets  capital_formation  capital_allocation  executive_compensation  debt  buybacks  tax_policy  Labor_markets  labor_share  unions  investment-government  downloaded 
november 2015 by dunnettreader
J.W. Mason - Understanding Short-Termism: Questions and Consequences - Roosevelt Institute - Nov 2015
addresses the most common objections to the idea that short-termism is a serious problem for the US economy. These objections fall into 3 broad categories: short-termism is not real (because of an apparent increase in business investment), short-termism is not harmful (because increased payouts allocate capital more efficiently), and short-termism is not our problem (because shareholders alone should determine what to do with a corporation’s surplus funds). J.W. Mason provides answers to 12 common questions about short-termism and shareholder payouts. Questions 1 and 2 reflect the first objection, Questions 3 through 7 reflect the second objection, and questions 8 through 12 reflect the third objection. Drawing on the best available data, he concludes that none of these objections hold up under scrutiny.This report is part of the Roosevelt Institute’s comprehensive Rewriting the Rules agenda, which aims to level the playing field and grow the economy. A companion report, “Ending Short-Termism,” develops a policy agenda to respond to this challenge -- downloaded pdf to Note
US_economy  investment  investors  capital_markets  corporate_finance  corporate_governance  shareholder_value  shareholders  short-termism  financial_system  equity_markets  capital_formation  capital_allocation  executive_compensation  debt  buybacks  tax_policy  downloaded 
november 2015 by dunnettreader
Diana Ayala Pena, Milan Nedeljkovic, Christian Saborowski - What Slice of the Pie? The Corporate Bond Market Boom in Emerging Economies | IMF Research - July 2015
This paper studies the determinants of shifts in debt composition among EM non-financial corporates. We show that institutions and macro fundamentals create an enabling environment for bond market development. During the recent boom episode, however, global cyclical factors accounted for most of the variation of bond shares in total corporate debt. The sensitivity to global factors appears to vary with relative bond market size—which we interpret to be associated with liquidity and easy entry and exit—rather than local fundamentals. Foreign bank linkages help explain why bond markets increasingly substituted for banks in channeling liquidity to EMs. Our results highlight the risk of capital flow reversal in EMs that benefited from the upturn in the global financial cycle mostly due to their liquid markets rather than strong fundamentals. -- downloaded pdf to Note
paper  IMF  financial_system  cross-border  emerging_markets  bond_markets  corporate_finance  disintermediation  capital_markets  capital_flows  liquidity  contagion  business_cycles  downloaded 
november 2015 by dunnettreader
Guillaume Vuillemey, review - Nicolas Buat, John Law: La dette ou comment s’en débarrasser - La Vie des idées - 8 juillet
Recensé : Nicolas Buat, John Law – La dette ou comment s’en débarrasser, Les Belles Lettres, Collection « Penseurs de la liberté », 2015, 272 p., 21 €.
-- Mots-clés : dette | monnaie | banques | XVIIIe siècle -- John Law a laissé son nom associé à un scandale financier considérable. Nicolas Buat retrace sa vie aventureuse, et ses projets ambitieux pour dynamiser l’économie et éteindre la dette de la France. -- Que l’on cherche à tirer de l’histoire de grands enseignements, ou que l’on se satisfasse d’y contempler une galerie de portraits et de tableaux sans conséquences pour notre temps, on ne peut demeurer indifférent au personnage de John Law. Le récent ouvrage biographique de Nicolas Buat – conservateur en chef des Archives de Paris – nous invite à le redécouvrir. S’il s’inscrit dans une série déjà relativement longue de travaux consacrés à Law (dont le plus connu est certainement le livre d’Edgar Faure, La Banqueroute de Law, paru en 1977), son grand mérite est de nous plonger dans l’atmosphère bouillonnante de la Régence, sans perdre le lecteur dans de trop pointilleuses descriptions du « Système » mis en place entre 1716 et 1720. -- downloaded pdf to Note
books  reviews  French_language  political_economy  18thC  biography  Law_John  French_government  French_politics  money  monetary_theory  monetary_policy  sovereign_debt  default  Mississippi_Company  bubbles  banking  currency  investors  Regency-France  financial_system  financial_crisis  capital_markets  financial_innovation  downloaded 
october 2015 by dunnettreader
Charles A.E. Goodhart, Enrico Perotti - Containing maturity mismatch | VOX, CEPR’s Policy Portal - 10 September 2015
In the last century, real estate funding by banks grew steadily. This column argues that the unprecedented expansion of banking in mortgage lending resulted in a high degree of maturity mismatch. The solution to this problem should focus on greater maturity matching, and not using insured deposits. One avenue to do so is by securitising mortgages with little maturity transformation. Another is to create intermediaries providing mortgage loans where the lender shares in the appreciation, while assuming some risk against the occasional bust. -- downloaded as pdf to Note
paper  banking  financial_system  financial_regulation  financial_crisis  capital_markets  risk-systemic  markets-structure  real_estate  mortgages  liquidity  money_market  deposit_insurance  disintermediation  maturity_transformation  securitization  institutional_investors  bubbles  Minsky  downloaded 
september 2015 by dunnettreader
Richard Thayer - Keynes's 'beauty contest' | The University of Chicago Booth School of Business - Sept 2015
Many other economists who supported the efficient-markets hypothesis (EMH) have been surprised by recent history, but there is one man who would not have been “shocked”: John Maynard Keynes.
capital_markets  Keynes  speculative_finance  asset_prices  financial_crisis  financial_regulation  EMH  behavioral_economics  bubbles  Instapaper  from instapaper
september 2015 by dunnettreader
Egmont Kakarot-Handtke - Make a Bubble, Take a Free Lunch, Break a Bank by :: SSRN - Oct 2012, update May 2015
University of Stuttgart - Institute of Economics and Law -- Standard economics is known to be incapable of integrating the real and the monetary sphere. The ultimate reason is that the whole theoretical edifice is built upon a set of behavioral axioms. Therefore, the formal starting point is moved to structural axioms. This makes it possible to formally track the complete process of value creation and destruction in the asset market and its consequences for the household and business sector. From the set of structural axioms emerge the well-known phenomena of a bubble from free lunches through appreciation to defaults due to a lack of potential next buyers. -- Pages in PDF File: 35 -- Keywords: new framework of concepts, structure-centric, axiom set, profit, rate of interest, liquidity preference, primary market, secondary market, parrot economics, theory of value, valuation price, appreciation, depreciation, net worth, debt/income ratio -- didn't download
paper  SSRN  economic_theory  macroeconomics  financial_system  markets-structure  bubbles  asset_prices  leverage  primary_markets  secondary_markets  liquidity  interest_rates  credit_booms  capital_markets  money_market 
september 2015 by dunnettreader
Egmont Kakarot-Handtke - Essentials of Constructive Heterodoxy: Financial Markets :: SSRN - June 2015
University of Stuttgart - Institute of Economics and Law -- What stands before all eyes as failed Orthodoxy is ultimately caused by the wrong answer to Mill's Starting Problem. It is now pretty obvious that one cannot put utility maximization, equilibrium, well-behaved production functions, ergodicity or any other physical or psychological or sociological or behavioral assumption into the premises. No way leads from such premises to the explanation of how the actual market economy works. The logical consequence is to discard them. Having first secured a superior formal starting point, the present paper addresses the question of how the various types of financial markets emerge from the elementary monetary circuit. -- Pages in PDF File: 33 -- Keywords: new framework of concepts, structure-centric, Law of Supply and Demand, Profit Law, IOU, complementarity of retained profit and saving, securities, bonds, common stock, mortgages, consumer financing, helicopter money -- didn't download
paper  SSRN  economic_theory  financial_system  capital_markets  money  profit  credit  asset_prices  investment  mortgages  leverage  consumer_finance  savings  equity-corporate  equity_markets  bond_markets 
september 2015 by dunnettreader
Darrell Duffie and Jeremy C. Stein - Reforming LIBOR and Other Financial Market Benchmarks (2015) | AEAweb: Journal of Economic Perspectives, 29(2): 191-212.
LIBOR is the London Interbank Offered Rate: a measure of the interest rate at which large banks can borrow from one another on an unsecured basis. LIBOR is often used as a benchmark rate—meaning that the interest rates that consumers and businesses pay on trillions of dollars in loans adjust up and down contractually based on movements in LIBOR. Investors also rely on the difference between LIBOR and various risk-free interest rates as a gauge of stress in the banking system. Benchmarks such as LIBOR therefore play a central role in modern financial markets. Thus, news reports in 2008 revealing widespread manipulation of LIBOR threatened the integrity of this benchmark and lowered trust in financial markets. We begin with a discussion of the economic role of benchmarks in reducing market frictions. We explain how manipulation occurs in practice, and illustrate how benchmark definitions and fixing methods can mitigate manipulation. We then turn to an overall policy approach for reducing the susceptibility of LIBOR to manipulation before focusing on the practical problem of how to make an orderly transition to alternative reference rates without raising undue legal risks. -- didn't download
article  financial_system  financial_regulation  money_market  capital_markets  markets-structure  LIBOR  fraud  business-norms  business_ethics  trust  market_manipulation  accountability 
september 2015 by dunnettreader
Symposium: The Bailouts of 2007-2009 (Spring 2015) | AEAweb: Journal of Economic Perspectives Vol. 29 No.2
Austan D. Goolsbee and Alan B. Krueger - A Retrospective Look at Rescuing and Restructuring General Motors and Chrysler (pp. 3-24) **--** W. Scott Frame, Andreas Fuster, Joseph Tracy and James Vickery - The Rescue of Fannie Mae and Freddie Mac (pp. 25-52) **--** Charles W. Calomiris and Urooj Khan - An Assessment of TARP Assistance to Financial Institutions (pp. 53-80) **--** Robert McDonald and Anna Paulson - AIG in Hindsight (pp. 81-106) **--** Phillip Swagel - Legal, Political, and Institutional Constraints on the Financial Crisis Policy Response (pp. 107-22) -- available online, didn't download
article  journals-academic  financial_system  Great_Recession  financial_crisis  bailouts  bail-ins  capitalism-systemic_crisis  capital_markets  banking  bank_runs  shadow_banking  NBFI  securitization  credit_booms  credit_ratings  incentives-distortions  public-private_partnerships  Fannie_Mae  housing  leverage  financial_system-government_back-stop  financial_innovation  firesales  liquidity  asset_prices  Fed  lender-of-last-resort  regulatory_capture  regulatory_avoidance  credit_crunch  bankruptcy  government_agencies  government_finance  global_economy  global_governance  international_finance  international_monetary_system  international_crisis  property_rights  derivatives  clearing_&_settlement  GSEs  bubbles 
september 2015 by dunnettreader
Steve Cecchetti and Kim Schoenholtz - Bond market liquidity: should we be worried? — Money, Banking and Financial Markets
Our bottom line is this: resilience of intermediaries and resilience of markets are mutually reinforcing. With more resilient institutions, someone is more likely to stand ready to make a market in bonds – both Treasuries and corporates – so long as the rewards are adequate. Since the less liquid a market is, the higher the return to market making will be, the more likely it is that someone will step up to trade when price moves are large. Put another way, better regulation has removed the public subsidy to trading activity that banks and others were able to capture prior to the crisis, so making markets has become more expensive and prices may have to move more than before to attract stabilizing traders. But during those periods when liquidity is particularly valuable, the rewards should exceed these higher capital and liquidity costs. We worry less, not more, because enhanced capital and liquidity requirements are making intermediaries more resilient. Tags: Corporate bonds, Bond market, Liquidity, U.S. Treasury bonds, High-frequency trading, Contagion, Systemic risk -- really good on corporate bonds and links to recent studies on the Treasury market, especially after the flash crash in October 2014 -- downloaded pdf to Note
financial_system  financial_regulation  financial_crisis  capital_markets  risk-systemic  markets-structure  HFT  liquidity  capital_adequacy  banking  broker-dealers  intermediation  corporate_finance  Dodd-Frank  downloaded 
august 2015 by dunnettreader
Steve Cecchetti and Kim Schoenholtz - Bond market liquidity: should we be worried? - August 2015
Very nice analysis -- the point re illiquid corporates can't be made often enough in response to the whining. And the HFT looks like a potentially bigger problem than higher capital requirements pushing the big boys out of the dealer business. The NY Fed and Treasury are constantly monitoring the primary and secondary markets in the only stuff that matters and have tools to improve things if needed.
Pocket  financial_regulation  capital_markets  bond_markets  money_market  capital_adequacy  market-makers  markets-structure  Fed  liquidity  corporate_finance  from pocket
august 2015 by dunnettreader
Leonard E. Burman, William G. Gale, et al - Financial transaction taxes in theory and practice | Brookings Institution - June 30, 2015
By: Leonard E. Burman, William G. Gale, Sarah Gault, Bryan Kim, Jim Nunns and Steve Rosenthal -- In response to the financial market crisis and Great Recession, there has been a resurgence of interest in financial transaction taxes (FTTs) around the world. We estimate that a well-designed FTT could raise about $50 billion per year in the United States and would be quite progressive. We discuss the effects of an FTT on various dimensions of financial sector behavior and its ambiguous effects on economic efficiency. -- downloaded pdf to Note
paper  financial_system  capital_markets  markets-structure  HFT  taxes  financial_economics  financial_transaction_tax  liquidity  market_makers  tax_policy  tax_collection  downloaded 
july 2015 by dunnettreader
Financial Market Trends - OECD Journal - Home page | OECD
‌The articles in Financial Market Trends focus on trends and prospects in the international and major domestic financial markets and structural issues and developments in financial markets and the financial sector. This includes financial market regulation, bond markets and public debt management, insurance and private pensions, as well as financial statistics. -- links to the contents of each issue of the journal
journal  website  paper  financial_system  global_economy  global_system  financial_regulation  financial_crisis  capital_markets  risk-systemic  international_finance  banking  NBFI  insurance  markets-structure  risk_assessment  risk_management  sovereign_debt  corporate_finance  corporate_governance  institutional_investors  pensions  consumer_protection  equity-corporate  equity_markets  debt  debt-overhang  leverage  capital_flows  capital_adequacy  financial_economics  financial_innovation  financial_system-government_back-stop  bailouts  too-big-to-fail  cross-border  regulation-harmonization  regulation-costs  statistics 
july 2015 by dunnettreader
Hélène Rey - Dilemma Not Trilemma: The Global Financial Cycle and Monetary Policy Independence (2013)
Rey, Hélène, 2013, “Dilemma Not Trilemma: The Global Financial Cycle and Monetary Policy Independence” (Kansas City, Missouri: Federal Reserve Bank). -- downloaded pdf to Note
International_economics  international_finance  international_monetary_system  capital_flows  FX  monetary_policy  capital_markets  capital_controls  emerging_markets  downloaded  from notes
july 2015 by dunnettreader
Christian Thimann - The economics of insurance and its borders with general finance | VOX, CEPR’s Policy Portal 07/17/2015
What is insurance and where does insurance end?’, is a pressing question in international finance as global regulators are still pondering whether there can be systemic risk in insurance. This column argues that the challenge faced by regulators partly stems from terminological confusion between insurance activities and more general financial activities. -- downloaded pdf to Note
paper  financial_system  insurance  financial_regulation  financial_crisis  capital_markets  risk-systemic  international_finance  downloaded 
july 2015 by dunnettreader
Erlend W Nier, Tahsin Saadi Sedik - Capital flows, emerging markets and the global financial cycle | VOX, CEPR’s Policy Portal - 04 January 2015
Large and volatile capital flows into emerging economies since the Global Financial Crisis have re-invigorated efforts to unearth the determinants of these flows. This column investigates the interplay between global risk aversion (captured by the VIX) and countries’ characteristics. The authors also explore what policies countries should employ to protect themselves against the volatility of capital flows. The findings indicate that capital flows to emerging markets cannot be controlled without incurring substantial costs.
paper  emerging_markets  capital_flows  capital_markets  global_system  international_finance  global_financial_cycle  financial_crisis  Great_Recession  capital_controls  volatility  contagion  risk-systemic 
july 2015 by dunnettreader
Anton Korinek - Going against the flow: Dealing with capital flows to emerging markets | VOX, CEPR’s Policy Portal - 22 December 2010
Capital flows to emerging markets are controversial territory. This column argues that they create externalities that make the recipient economies more vulnerable to financial fragility and crises. It adds that policymakers can make their economies better off by regulating and discouraging the use of risky forms of external finance – in particular short-term dollar-denominated debts
paper  emerging_markets  capital_flows  capital_markets  global_system  international_finance  global_financial_cycle  financial_crisis  Great_Recession  capital_controls  volatility  contagion  risk-systemic  risk-mitigation 
july 2015 by dunnettreader
Jakob de Haan, Dirk Schoenmaker -Teaching finance after the crisis | VOX, CEPR’s Policy Portal - 06 July 2015
The financial crisis brought with it many challenges, both to prevailing disciplinary tenets, and for research and policy more generally. This column outlines the lessons that can be drawn from the financial crisis – issues like financial market failures, macro-prudential policy, structural changes of the financial system, and the European banking union. It argues for the inclusion of these topics in curricula for the next generation of finance students
financial_economics  financial_system  financial_regulation  financial_crisis  capital_markets  EMH  information-markets  macroprudential_policies  cross-border  European_integration  ECB  banking  business_cycles  Minsky 
july 2015 by dunnettreader
The Influence of Stock Market Listing on Human Resource Management: Evidence for France and Britain by Neil Conway, Simon Deakin, Suzanne J. Konzelmann, Héloïse Petit, Antoine Reberioux, Frank Wilkinson :: SSRN - British Journal of Industrial Relations,
Neil Conway, Birkbeck College -- Simon Deakin, Cambridge - Centre for Business Research; European Corporate Governance Institute; Cambridge - Faculty of Law -- Suzanne J. Konzelmann, Birkbeck College - Social Sciences, School of Management and Organizational Psychology; Cambridge - Social and Political Sciences -- Héloïse Petit -- Antoine Reberioux, Université Paris VII Denis Diderot; University Antilles Guyane - Law and Economics -' Frank Wilkinson, Birkbeck College -- We use data from the Relations Professionnelles et Négociations d'Entreprise survey of 2004 and the Workplace Employment Relations Survey of 2004 to analyse how far approaches to human resource management differ according to whether an establishment is part of a company with a stock exchange listing. In both countries we find that listing is positively associated with teamworking and performance-related pay, while in France, but not in Britain, it is also linked to worker autonomy and training. Our findings are inconsistent with the claim that shareholder pressure operates as a constraint on the adoption of high-performance workplace practices. The pattern is similar in the two countries, but with a slightly stronger tendency for listing to be associated with high-performance workplace practices in France. -- PDF File: 43 -- paywall but a working paper version on SSRN -- didn't download
article  SSRN  UK_economy  France  business_practices  labor  workforce  corporate_governance  corporate_finance  capital_markets 
july 2015 by dunnettreader
Suzanne J. Konzelmann, Marc Fovargue-Davies - Anglo-Saxon Capitalism in Crisis? Models of Liberal Capitalism and the Preconditions for Financial Stability :: SSRN (rev'd September 2011) Cambridge Centre for Business Research Working Paper No. 422
Suzanne J. Konzelmann, Birkbeck College - Social Sciences, School of Management and Organizational Psychology; Cambridge - Social and Political Sciences -- Marc Fovargue-Davies, U of London - The London Centre for Corporate Governance & Ethics -- The return to economic liberalism in the Anglo-Saxon world was motivated by the apparent failure of Keynesian economic management to control the stagflation of the 1970s and early 1980s. In this context, the theories of economic liberalism, championed by Friederich von Hayek, Milton Friedman and the Chicago School economists, provided an alternative. However, the divergent experience of the US, UK, Canada and Australia reveals two distinct ‘varieties’ of economic liberalism: the ‘neo-classical’ incarnation, which describes American and British liberal capitalism, and the more ‘balanced’ economic liberalism that evolved in Canada and Australia. In large part, these were a product of the way that liberal economic theory was understood and translated into policy, which in turn shaped the evolving relationship between the state and the private sector and the relative position of the financial sector within the broader economic system. Together, these determined the nature and extent of financial market regulation and the system’s relative stability during the 2008 crisis. -- PDF File: 61 -- Keywords: Corporate governance, Regulation, Financial market instability, Liberal capitalism, Varieties of capitalism -- downloaded pdf to Note
paper  SSRN  economic_history  20thC  21stC  post-WWII  post-Cold_War  US_politics  UK_politics  political_economy  political_culture  ideology  neoliberalism  economic_theory  economic_sociology  business_practices  business-and-politics  business-norms  business_influence  Keynesianism  neoclassical_economics  Austrian_economics  Chicago_School  capitalism-systemic_crisis  capitalism-varieties  corporate_governance  corporate_finance  capital_markets  capital_as_power  financialization  finance_capital  financial_regulation  Great_Recession  financial_crisis  policymaking  trickle-down  Canada  Australia  downloaded 
july 2015 by dunnettreader
Financial Transaction Taxes in Theory and Practice | Brookings Institution - June 30, 2015
By: Leonard E. Burman, William G. Gale, Sarah Gault, Bryan Kim, Jim Nunns and Steve Rosenthal -- In response to the financial market crisis and Great Recession, there has been a resurgence of interest in financial transaction taxes (FTTs) around the world. We estimate that a well-designed FTT could raise about $50 billion per year in the United States and would be quite progressive. We discuss the effects of an FTT on various dimensions of financial sector behavior and its ambiguous effects on economic efficiency. -- their overview sets up lots of strawmen while acknowledging that FTTs are quite common even in money center markets like London, but they've done some estimates of various types of impacts in the paper -- didn't download
paper  financial_system  financial_regulation  financial_crisis  capital_markets  financial_transaction_tax  liquidity  volatility  transaction_costs  international_finance 
july 2015 by dunnettreader
Reinier Kraakman, Bernard S. Black - A Self Enforcing Model of Corporate Law :: SSRN - Harvard Law Review, vol. 109, pp. 1911-1982, 1996
This paper develops a "self-enforcing" approach to drafting corporate law for emerging capitalist economies, based on a case study: a model statute that we helped to develop for the Russian Federation, which formed the basis for the recently adopted Russian law on joint-stock companies. The paper describes the contextual features of emerging economies that make importing statutes from developed countries inappropriate, including the prevalence of controlled companies and the weakness of institutional, market, cultural, and legal constraints. Against this backdrop, we argue that the best legal strategy for protecting outside investors in emerging economies while simultaneously preserving the discretion of companies to invest is a self-enforcing model of corporate law. The self-enforcing model structures decisionmaking processes to allow large outside shareholders to protect themselves from insider opportunism with minimal resort to legal authority, including the courts. Among the examples of self-regulatory statutory provisions are a mandatory cumulative voting rule for the selection of directors, which assures that minority blockholders in controlled companies have board representation, and dual shareholder- and board-level approval procedures for self-interested transactions. The paper also examines how one can induce voluntary compliance and structure remedies in emerging economies, as well as the implications of the self-enforcing model for the ongoing debate over the efficiency of corporate law in developed economies. -- PDF File: 73 -- downloaded pdf to Note
article  SSRN  corporate_law  corporate_governance  investor_protection  investors  capital_markets  emerging_markets  transition_economies  Russia  privatization  downloaded 
july 2015 by dunnettreader
La Porta et al -- Investor Protection and Corporate Governance by :: SSRN 2000
Rafael La Porta, Florencio Lopez de Silanes, Andrei Shleifer, Robert W. Vishny -- Recent research on corporate governance has documented large differences between countries in ownership concentration in publicly traded firms, in the breadth and depth of financial markets, and in the access of firms to external finance. We suggest that there is a common element to the explanations of these differences, namely how well investors, both shareholders and creditors, are protected by law from expropriation by the managers and controlling shareholders of firms. We describe the differences in laws and the effectiveness of their enforcement across countries, summarize the consequences of these differences, and suggest potential strategies of reform of corporate governance. We argue that the legal approach is a more fruitful way to understand corporate governance and its reform than the conventional distinction between bank-centered and market-centered financial systems. -- PDF File: 40 -- saved to briefcase
paper  SSRN  corporate_law  corporate_governance  fiduciaries  investor_protection  corporate_ownership  shareholders  capital_markets  banking-universal 
july 2015 by dunnettreader
Sticky Covenants by Gus De Franco, Florin P. Vasvari, Dushyantkumar Vyas, Regina Wittenberg Moerman :: SSRN ( rev'd Jan 2014)
Gus De Franco, U of Toronto, Rotman School of Management; Florin P. Vasvari, London Business School; Dushyantkumar Vyas, Rotman School of Management; Regina Wittenberg Moerman, U of Chicago, Booth School of Business -- We examine the determinants of the strength of bond covenants in protecting bondholders’ interests using a unique dataset constructed by Moody’s that allows us to measure the restrictiveness of bond covenant packages beyond the covenant inclusion measures used in the prior literature. We find that the covenant restrictiveness of a bond is highly persistent over time: it is strongly associated with the covenant restrictiveness of the borrower’s previous bond issues. We show that this persistence is driven by the restrictiveness of the covenant packages in previous bonds arranged by the firm’s underwriter or advised by the firm’s and underwriter’s legal counsels, consistent with these debt market intermediaries facing high switching costs in changing bond contractual terms. The restrictiveness of covenants in bonds issued by industry peers is another driver of the persistence, suggesting that covenants are written to facilitate bonds’ comparability. We next document that the bond covenant restrictiveness changes only when the borrower experiences a significant decline in its creditworthiness or when there is a substantial tightening in the credit supply in the economy. We also show that secondary bond market investors discount bond prices when bond covenants’ restrictiveness remains persistent despite a substantial decline in a borrower’s creditworthiness since the previous bond issue. PDF File: 64 -- Covenants, Covenant Restrictiveness, Persistence, Secondary Bond -- saved to briefcase
paper  SSRN  capital_markets  corporate_finance  bond_markets  risk  risk_management  asset_prices  spreads  risk_assessment  credit_ratings  covenants  intermediation  primary_markets  secondary_markets  creditors 
july 2015 by dunnettreader
Frederick Tung -Leverage in the Board Room: The Unsung Influence of Private Lenders in Corporate Governance:: SSRN - UCLA Law Review, Vol. 57, 2009 (rev'd 2012)
Boston University School of Law --:The influence of banks and other private lenders pervades public companies. From the first day of a lending arrangement, loan covenants and built-in contingency provisions affect managerial decision making. Conventional corporate governance analysis has been slow to notice or account for this lender influence. Corporate governance discourse has traditionally focused only on corporate law arrangements. The few existing accounts of creditors' influence over firm managers emphasize the drastic actions creditors take in extreme cases - when a firm is in serious trouble - but in fact, private lender influence is a routine feature of corporate governance even absent financial distress. (..) I explain the regularity of lender influence on managerial decision making - "lender governance" - comparing this routine influence to conventional governance arrangements and boards of directors in particular. I show that the extent of private lender influence rivals that of conventional governance mechanisms, and I discuss the doctrinal and policy implications of this unsung influence. Accounting for lender governance requires a new examination of corporate fiduciary duties, debtor-creditor laws, and the regulatory reform proposals that have emerged to address the current financial crisis. I also discuss the implications of private lender influence for future corporate governance research. -- PDF File: 69 -- lender governance, corporate governance, covenants, credit agreement, private lender, private debt, creditor, financial regulation, financial crisis -- saved to briefcase
article  SSRN  corporate_finance  corporate_governance  creditors  banking  relationship_lending  financial_regulation  corporate_law  capital_markets  commercial_law  debtors  debtor-creditor  debt-restructuring  financial_crisis  finance_capital  corporate_control 
july 2015 by dunnettreader
Anne Beatty, Scott Liao - Financial Accounting in the Banking Industry: A Review of the Empirical Literature:: SSRN October 23, 2013
Anne Beatty, Ohio State - Dept of Accounting & Management Information Systems; Scott Liao, U of Toronto, Rotman School of Management -- Rotman School of Management Working Paper No. 2346752 -- We survey research on financial accounting in the banking industry. After providing a brief background of the micro-economic theories of the economic role of banks, why bank capital is regulated, and how the accounting regime affects banks’ economic decisions, we review three streams of empirical research. Specifically we focus on research examining the relation between bank financial reporting and the valuation and risk assessments of outside equity and debt, the relation between bank financial reporting discretion, regulatory capital and earnings management, and banks’ economic decisions under differing accounting regimes. We provide our views about what we have learned from this research and about what else we would like to know. We also provide some empirical analyses of the various models that have been used to estimate discretion in the loan loss provision. We further discuss the inherent challenges associated with predicting how bank behavior will respond under alternative accounting and regulatory capital regimes.-- PDF File: 121 -- Keywords: financial accounting; bank regulatory capital; information asymmetry -- saved to briefcase
paper  SSRN  financial_system  financial_regulation  capital_markets  banking  disclosure  accounting  capital_adequacy  asset_prices  risk  investors  leverage  incentives  incentives-distortions  balance_sheet  Basle 
july 2015 by dunnettreader
Lyman Johnson, David Millon - Recalling Why Corporate Officers are Fiduciaries :: SSRN - William & Mary Law Review, Vol. 46, 2005
Lyman Johnson, Washington and Lee U Law School; U of St. Thomas, St. Paul/Minneapolis, MN - School of Law -- David Millon,Washington and Lee U Law School -- For all the recent federal attention to ...corporate officer and director functions, ... state fiduciary duty law makes no distinction between the fiduciary duties of these two groups. (..) The thesis of this article is that corporate officers are fiduciaries because they are agents. (..) drawing on the fiduciary duties of agents for guidance in fashioning modern understandings of corporate officer duties - and differentiating those duties from those of directors - can provide much-needed structure to what otherwise threatens to be an ad hoc enterprise. There are at least 3 benefits of our thesis. (1) state law remains the primary source for establishing the basic framework of corporate governance relations, both through corporate statutes and through judge-made fiduciary duty law. (..) (2) our thesis clarifies immensely why courts can and should more closely scrutinize officer conduct than they now review director performance (..). (3) At a theoretical level, ...our thesis has several implications. (..) we are entering an era when, due to heavier corporate regulation, the entity conception of the firm will be strengthened, as positive law, including agency law, still builds on that understanding of corporate relations. This period follows a span of perhaps 20 years when a highly disaggregated conception of corporate relations - the nexus of contracts theory - has predominated. We also believe that in the policy arguments for and against strong fiduciary duties over the years, virtually no attention has been given to distinguishing whether what is fitting for outside directors in the fiduciary duty area - relatively slack duties - is also fitting for corporate officers. -- saved to briefcase
article  SSRN  corporate_law  financial_regulation  capital_markets  fiduciaries  principal-agent  agents  duties-legal  officers-&-directors  corporate_governance  shareholders  investors  state_law  federalism  federal_preemption  SEC  SROs  corporate_personhood  directors  duty_of_care  duty_of_loyalty  conflict_of_interest  legal_remedies  law-and-economics  law-and-finance 
july 2015 by dunnettreader
The Misrepresentation of Earnings by Ilia D. Dichev, John R. Graham, Campbell R. Harvey, Shivaram Rajgopal :: SSRN June 2, 2015
Ilia D. Dichev, Emory University - Goizueta Business School -- John R. Graham, Duke University; NBER -- Campbell R. Harvey, Duke University - Fuqua School of Business; NBER -- Shivaram Rajgopal, Emory University - Goizueta Business School -- We ask nearly 400 CFOs about the definition and drivers of earnings quality, with a special emphasis on the prevalence and detection of earnings misrepresentation. CFOs believe that the hallmarks of earnings quality are sustainability, absence of one-time items, and backing by actual cash flows. Earnings quality is determined in about equal measure by controllable factors like internal controls and corporate governance, and non-controllable factors like industry membership and macroeconomic conditions. On earnings misrepresentation, CFOs believe that in any given period a remarkable 20% of firms intentionally distort earnings, even though they are adhering to generally accepted accounting principles. The economic magnitude of the misrepresentation is large, averaging about 10% of reported earnings. While most misrepresentation involves earnings overstatement, interestingly, one third of the firms that are misrepresenting performance are low-balling their earnings or reversing a prior intentional overstatement. Finally, CFOs provide a list of red flags that can be used to detect earnings misrepresentation. --"PDF File: 23 -- saved to briefcase
paper  SSRN  financial_system  financial_regulation  capital_markets  disclosure  accounting  GAAP  corporate_governance  corporate_citizenship  business_practices  business-norms  business-ethics  market_manipulation  markets-psychology  profits  investors  investor_protection  incentives-distortions 
july 2015 by dunnettreader
Edward B. Rock - Institutional Investors in Corporate Governance (Jan 2015) :: SSRN - Oxford Handbook on Corporate Law and Governance, 2015, Forthcoming
Penn Law School -- chapter examines the role of institutional investors in corporate governance and the role of regulation in encouraging institutional investors to become active stewards. (..) what lessons we can draw from the US experience for the EU’s 2014 proposed amendments to the Shareholder Rights Directive.(...) survey how institutional investors themselves are governed and how they organize share voting. (...) 2 central questions: (a) why, over the last 25 years, have institutional investors not fulfilled the optimists’ hopes?; and (b) can the core incentive problems that subvert Institutional Investor activism be cured by regulation? The US experience [substantial deregulation led to only modest increases in shareholder activism], suggests (..) institutional investors’ relative passivity is a fundamental lack of incentives. I examine the disappointing results of the SEC’s long experiment with incentivizing mutual funds to vote their shares (...) the EU efforts are likely to be similarly disappointing. I then examine the important role that hedge funds now play in catalyzing institutional shareholders, and consider some of the risks in relying on such highly incentivized actors. -- PDF File: 26 -- saved to briefcase
chapter  books  SSRN  law-and-economics  behavioral_economics  financial_economics  financial_regulation  corporate_governance  corporate_law  corporate_finance  capital_markets  corporate_control_markets  institutional_investors  shareholders  shareholder_voting  mutual_funds  incentives  activist_investors  investors  hedge_funds  proxies  comparative_law  administrative_law  EU-law  regulation-harmonization  regulation-enforcement  fiduciaries  profit_maximization  EU-regulation 
july 2015 by dunnettreader
Ronald J. Gilson, Reinier Kraakman - Market Efficiency after the Financial Crisis: It's Still a Matter of Information Costs :: SSRN - European Corporate Governance Institute Law Working Paper No. 242/2014
Ronald J. Gilson, Stanford Law & Columbia Law; Reinier Kraakman, Harvard Law; both ECGI -- [Financial crisis is said] to have demonstrated the bankruptcy of the Efficient Capital Market Hypothesis (“ECMH”). (..) the ECMH had moved beyond academia, fueling decades of a deregulatory agenda. (..) when economic theory moves from academics to policy, (..) inevitably refashioned to serve the goals of political argument. This happened starkly with the ECMH. It was subject to its own bubble – (..) expanded from a narrow but important academic theory about the informational underpinnings of market prices to a broad ideological preference for market outcomes over even measured regulation. (..) the ECMH addresses informational efficiency, which is a relative, not an absolute measure. This focus on informational efficiency leads to a more focused understanding of what went wrong in 2007-2008. Yet informational efficiency is related to fundamental efficiency (..) Properly framing market efficiency focuses our attention on the frictions that drive a wedge between relative efficiency and efficiency under perfect market conditions. (..) relative efficiency is a diagnostic tool that identifies the information costs and structural barriers that reduce price efficiency which, in turn, provides part of a realistic regulatory strategy. While it will not prevent future crises, improving the mechanisms of market efficiency will make prices more efficient, frictions more transparent, and the influence of politics on public agencies more observable, which may allow us to catch the next problem earlier. PDF File: 87 -- saved to briefcase
paper  SSRN  financial_system  financial_regulation  financial_crisis  capital_markets  EMH  information-markets  information-asymmetric  efficiency  prices  financial_economics  animal_spirits  behavioral_economics 
july 2015 by dunnettreader
Steve Cecchetti and Kim Schoenholtz - Dodd-Frank: Five Years After — Money, Banking and Financial Markets - June 2015
On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (hereafter, DF), the most sweeping financial regulatory… Very good roundup of the holes that are left, the inability to force a coherent inter-agency approach to key risk regulation areas (e.g. the Financial Stability Oversight couldn't force the SEC to write adequate Money Market Funds reg, making it even worse than before the crisis), and the areas where regs are excessively complex, costly etc -- so they either won't do the job (and regulators will wind up making ad hoc exceptions because they're not workable) or their going to get gamed. Basically comes down to the age-old problem of regulation by institutional form rather than by function. The financial crisis was the best chance we had to rationalize the system, and Paulson had Treasury working on a proposal to do just that, but it got trashed when the financial system blew up and everybody was battling for narrow interests in a crisis atmosphere with inflamed populist politics -- only thing positive was finally getting rid of OCC. I do think they're unnecessarily suspicious of the new consumer protection agency -- given that a full overhaul wasn't possible, somebody needs to be responsible for looking out for consumers, since the main regulators are focused on financial risk issues at the institutional or system level.
Instapaper  US_economy  US_politics  financial_regulation  financial_crisis  Fed  SEC  banking  capital_markets  government_agencies  risk  risk-systemic  risk_management  NBFI  shadow_banking  money_market  institutional_investors  consumer_protection  leverage  capital_adequacy  inter-agency  liquidity  arbitrage  markets-structure  intermediation  financial_instiutions  financial_system-government_back-stop  from instapaper
june 2015 by dunnettreader
Pedro Gurrola-Perez and David Murphy - :Filtered historical simulation Value-at-Risk models and their competitors | Bank of England - Working Paper No. 525 March 2015-
Financial institutions have for many years sought measures which cogently summarise the diverse market risks in portfolios of financial instruments. This quest led institutions to develop Value-at-Risk (VaR) models for their trading portfolios in the 1990s. Subsequently, so-called filtered historical simulation VaR models have become popular tools due to their ability to incorporate information on recent market returns and thus produce risk estimates conditional on them. These estimates are often superior to the unconditional ones produced by the first generation of VaR models. This paper explores the properties of various filtered historical simulation models. We explain how these models are constructed and illustrate their performance, examining in particular how filtering transforms various properties of return distribution. The procyclicality of filtered historical simulation models is also discussed and compared to that of unfiltered VaR. A key consideration in the design of risk management models is whether the model’s purpose is simply to estimate some percentile of the return distribution, or whether its aims are broader. We discuss this question and relate it to the design of the model testing framework. Finally, we discuss some recent developments in the filtered historical simulation paradigm and draw some conclusions about the use of models in this tradition for the estimation of initial margin requirements. -- downloaded pdf to Note
paper  financial_instiutions  risk  risk_management  financial_regulation  banking  business_cycles  capital_markets  capital_adequacy  NBFI  probability  economic_models  Basel  downloaded 
june 2015 by dunnettreader
Caspar Siegert and Matthew Willison - Estimating the extent of the ‘too big to fail’ problem – a review of existing approaches | Bank of England -- Financial Stability Paper 32: 13 February 2015
​How big is the ‘too big to fail’ (TBTF) problem? Different approaches have been developed to estimate the impact being perceived as TBTF might have on banks’ costs of funding. One approach is to look at how the values of banks’ equity and debt change in response to events that may have altered expectations that banks are TBTF. Another is to estimate whether debt costs vary across banks according to features that make them more or less likely to be considered TBTF. A third approach is to estimate a model of the expected value of government support to banks in distress. We review these different approaches, discussing their pros and cons. Policy measures are being implemented to end the TBTF problem. Approaches to estimating the extent of the problem could play a useful role in the future in evaluating the success of those policies. With that in mind, we conclude by outlining in what ways we think approaches need to develop and suggest ideas for future research. -- didn't download
paper  banking  financial_crisis  bank_runs  financial_system-government_back-stop  too-big-to-fail  rents  rent-seeking  risk_premiums  capital_markets  margin_requirements  equity_markets  leverage 
may 2015 by dunnettreader
MN Baily, W Bekker and SE Holmes - The big four banks: The evolution of the financial sector, Part I | Brookings Institution - May 26, 2015
Martin Neil Baily, William Bekker and Sarah E. Holmes -- This report is the first in a series on the evolution of the financial sector. The series aims to retrace the major trends that have shaped the banking sector since the crisis and to orient the public as to where industry stands today. This first installment focuses on the “Big Four” banks: JP Morgan Chase, Bank of America, Citi, and Wells Fargo. This first report is meant to be a factual exploration of the balance sheets of the four largest banks. We will follow this with a report on the regional banks and then a sample of smaller banks. While we give some commentary on the data, the purpose at this stage is to allow readers access to a picture of the largest banks and form their own judgments about why the banks have changed. Putting together the balance sheets of the big four seemed at first as if it would be a straightforward task, but the reality has been different and more difficult. We have aimed to present an accurate picture in the following pages but we would welcome comments. -- didn't download
paper  US_economy  banking  financial_system  financial_crisis  capital_adequacy  capital_markets  too-big-to-fail  intermediation 
may 2015 by dunnettreader
Charles A.E. Goodhart, Enrico Perotti - Maturity mismatch stretching: Banking has taken a wrong turn | VOX, CEPR’s Policy Portal CEPR - Policy Insight 81 05/06/2015
Banks were not always as mismatched as today.Till the 19th century, bank lending to the private sector was meant to be primarily for short-term, self-liquidating, trade-related working capital, especially in the guise of ‘real bills’, bills of exchange fnancing trade. This was true since the emergence of banks in the 15th century, supporting merchants in their long-distance trade. This approach persisted in the Anglo-American tradition, where banks discounted promissory notes and held the rest of the portfolio in easily saleable securities, especially Consols. This enabled a credible promise to depositors, as banks’ assets were either short-term, or easily sold, with little maturity mismatch. -- And then came Continental universal banking, employed to play catch up -- and then with disintermediation, and the need for banks to find other business, and securitization, and they became hostage to the long-wave boom and bust of real estate -- Land is scarce and its availability is fxed. In other words, real estate value has a large pure rent component. Thus in any expansion, real estate prices generally rise faster than consumer prices, and become prone to bubbles and busts. To avoid socialising risk taking, what is needed is an intermediation process where the fnancing comes from investors that assume the bulk of such risk. We call for solutions that ensure such risk bearing by focusing on two principles: much greater maturity matching and no insured deposit funding. These goals may be achieved by various means. One avenue is to securitise mortgages with little maturity transformation, such as those funded by bond or pension funds. Another is to create new intermediaries providing mortgage loans where the lender shares in the appreciation, while assuming some risk against the occasional bust. This may be seen as a shift towards the principles of Islamic banking, but it is also a return to tradition as in the early days of banking. -- downloaded pdf to Note
economic_history  18thC  19thC  20thC  21stC  banking  banking-universal  intermediation  maturity_transformation  disintermediation  capital_markets  securitization  housing  real_estate  bubbles  mortgages  financial_innovation  financial_crisis  liquidity  institutional_investors  debt-restructuring  debt-overhang  financial_stability  financial_system-government_back-stop  NBFI  downloaded 
may 2015 by dunnettreader
Toby Nangle - Labour power sets the neutral real rate | VOX, CEPR’s Policy Portal - 09 May 2015
The recent remarkably low interest rates have puzzled economists. The standard explanation rests on the extraordinary manoeuvres of the world’s largest central banks. This column argues, however, that it is due to economic developments, specifically globalisation and the collapse in labour power in the west. -- downloaded page as pdf to Note
macroeconomics  global_economy  globalization  labor_share  Labor_markets  inequality-global  inequality  OECD_economies  interest_rates  asset_prices  investment  capital  stagnation  central_banks  capital_markets  China-economy  off-shoring  downloaded 
may 2015 by dunnettreader
Economist's View: 'Social Costs of the Financial Sector' - Luigi Zingale lecture and paper - May 2015
Via Tim Taylor, a quotation from Luigi Zingales ("watch video of the lecture or read the talk at his website"): "While there is no doubt that a developed economy needs a sophisticated financial sector, at the current state of knowledge there is no theoretical reason or empirical evidence to support the notion that all the growth of the financial sector in the last forty years has been beneficial to society. In fact, we have both theoretical reasons and empirical evidence to claim that a component has been pure rent seeking. ..." -- downloaded pdf to Note of Zingale paper
financial_system  financial_innovation  financial_sector_development  rent-seeking  financial_regulation  financialization  capital_markets  banking  NBFI  shadow_banking  economic_growth  video  downloaded 
may 2015 by dunnettreader
Filippo Occhino - Debt-Overhang Banking Crises | Cleveland Fed - Dec 2014
WP 14-25 -- This paper studies how a worsening of the debt overhang distortion on bank lending can explain banking solvency crises that are accompanied by a plunge of bank asset values and by a severe contraction of lending and economic activity. Since the value of bank assets depends on economic prospects, a pessimistic view of the economy can be self-fulfilling and can trigger a financial crisis: If economic prospects are poor, bank asset values decline, the bank risk of default rises, and the associated debt overhang distortion worsens. The worsening of the distortion leads to a contraction in bank loans and a decline in economic activity, which confirms the initial pessimistic view. Signals of the existence of systemic risk include: a rise in the volatility and the presence of two modes in the probability distribution functions of the returns of bank-issued bonds and of portfolios of bank-issued bonds and equities; and a surge in the correlation between bank-issued bond returns. Macroprudential policy should limit the sensitivity of bank balance sheets to the aggregate economy and to the financial sector, using investment restrictions, capital requirements, and stress tests. In the event of a crisis, policy options include reducing the above sensitivity with commitments and guarantees, stimulating the economy, and restructuring bank capital and ownership. -- didn't download -- wonder if he uses Minsky
paper  banking  financial_crisis  leverage  deleverage  economic_growth  risk-systemic  business_cycles  bank_runs  capital_markets  bond_markets  macroprudential_regulation  macroprudential_policies  volatility  default  firesales  FDIC  Fed  demand-side  credit  business-forecasts  Minsky  financial_economics 
may 2015 by dunnettreader
William Lazonick - Stock buybacks: From retain-and reinvest to downsize-and-distribute | Brookings Institution - April 2015
Stock buybacks are an important explanation for both the concentration of income among the richest households and the disappearance of middle-class employment opportunities in the United States over the past three decades. Over this period, corporate resource-allocation at many, if not most, major U.S. business corporations has transitioned from “retain-and-reinvest” to “downsize-and-distribute,” says William Lazonick in a new paper.
paper  US_economy  capital_markets  capitalism  investment  R&D  corporate_governance  corporate_finance  buybacks  shareholder_value  short-termism  incentives-distortions  labor_share  productivity  productivity-labor_share  inequality  wages  unemployment  downloaded 
may 2015 by dunnettreader
Steve Perlstein - Social Capital, Corporate Purpose, and the Revival of American Capitalism | Brookings Institution - January 2014
Since the Great Recession of 2008, corporate profits have more than rebounded, and yet the rest of the American economy has struggled to recover. Widening income inequality and an erosion of social capital and economic trust has deprived capitalism of its moral high ground. The public has lost confidence in big businesses--asking what purpose they serve in society writ large. Pearlstein argues we can begin to restoring the economic and moral legitimacy of American capitalism by reconsidering the purpose of corporations in American life. Despite the current dominance of the theory of “maximizing shareholder value,” this idea has little basis in history or law. Shifting to a more balanced form of capitalism will take time, but some possible steps for reform include: #-# Support investment funds dedicated to long-term horizons, including socially responsible investment funds #-# Recalibrate corporate governance law to allow for more flexible decision making #-# Rebalance capital gains taxes to encourage long-term stock holding by investors #-# Explore regulatory options for financial services, like a financial transaction tax to dampen the influence of short-term trading #-# Encourage a wider range of corporate metrics beyond quarterly earnings guidance #-# Reform shareholder voting rights to foster a sense of stewardship -- didn't download it -- Brookings also has video of Perlstein in Charlie Rose
paper  video  corporate_governance  corporate_citizenship  business_practices  corporate_finance  corporate_law  corporate_tax  financial_crisis  investors  institutional_investors  shareholder_value  capital_markets  shareholder_voting  capital_gains  financial_transaction_tax  short-termism  capitalism  capitalism-systemic_crisis 
may 2015 by dunnettreader
Bill Galston and Elaine Karmack - Overcoming corporate short-termism: Blackrock's chairman weighs in | Brookings Institution - April 2015
hen the head of the world’s largest investment fund raises fundamental questions about U.S. corporations, we should all pay attention.

In a letter earlier this week to the Fortune 500 CEOs, BlackRock Chairman Larry Fink criticized the short-term orientation that he believes shapes too much of today’s corporate behavior. “It concerns us,” he declared, that “in the wake of the financial crisis, many companies have shied away from investing in the future growth of their companies. Too many have cut capital expenditure and even increased debt to boost dividends and increase share buybacks.” And he concluded, “When done for the wrong reasons and at the expense of capital investment, [returning cash to shareholders] can jeopardize a company’s ability to generate sustainable long-term returns.”
institutional_investors  corporate_governance  corporate_citizenship  corporate_finance  CSR  short-termism  capital_markets  shareholder_value  capital_gains  investment  R&D  buybacks 
may 2015 by dunnettreader
Andrew C.W. Lund and Gregg D. Polsky - Report: Can Executive Compensation Reform Cure Short-Termism? | Brookings Institution - March 2013
There is an increasingly pervasive view among corporate governance observers that senior managers are too focused on short-term results at the expense of long-term interests. Concerns about “short-termism” have been expressed within the financial industry context and outside of it, but because of the recent financial crisis, much of the discussion has been directed at financial institutions. To combat short-termism, several commentators have advocated executive compensation reform to encourage senior managers to adopt a longer-term perspective. Yet these reforms will likely prove ineffective because of other significant pressures on managers to maintain current stock prices. -- Paper highlights include: #-# A general overview short-termism and the causes and effect of overweighing short-term results relative to long-term consequences when making decisions. #-# Proposals to redesign compensation structures to combat short-termism. #-# Questioning the effectiveness of compensation proposals. #-# A look at the new corporate governance world. #-# An examination of changes to senior management job security. #-# Policy proposals for better options to mitigate short-termism. -- didn't download it
paper  corporate_governance  executive_compensation  capital_markets  incentives-distortions  short-termism  firms-organization  management  managerialism 
may 2015 by dunnettreader
Steve Cecchetti and Kim Schoenholtz - The euro area's debt hangover — Money, Banking and Financial Markets - April 2015
You wouldn’t know it from the record low level of government bond yields, but much of Europe lives under a severe debt burden. Nonfinancial corporate debt exceeds 100 percent of GDP in Belgium, Finland, France, Ireland, Luxembourg, Netherlands, Portugal, and Spain. And, gross government debt (as measured by Eurostat) is close to or exceeds this threshold in Belgium, France, Greece, Ireland, Italy, Portugal and Spain. Debt levels this high have important long-run consequences. (...) they are a drag on growth. High debt means that households have more difficulty maintaining consumption when income falls; firms may be unable to keep up production and investment when revenue dips; and governments are in no position to smooth expenditure when revenue falls. More economic volatility means lower growth. Beyond that, high levels of debt reduce the effectiveness of central bank stimulus. (...) So, what is the euro area to do? We see three paths out of this predicament: (1) breathtaking supply reforms that trigger an investment boom; (2) inflation; or (3) a mix of asset sales and debt relief.The first option is the best. The alternatives would threaten the survival of the euro, undermine the fiscal credibility of major governments, or both. [After pointing out the problems with 1 and 2, they look at how much would sovereign_debt have to be reduced to reach debt sustainability targets embodied in Maastricht] For Greece, the write-down is 71% of face value; for Spain, 63%; and for France 50%. Taken as a whole, meeting the 60% Maastricht criterion (while maintaining bank system capital) would require that (..the) combined debt of [Greece, Spain and France of] €9.36 trillion be written down by a total of €5.07 trillion. As extreme as this sounds, it is, in fact, insufficient. Many euro-area governments also face significant unfunded pension liabilities. (...) The sooner they own up to this, the better for their long-term growth prospects. -- copied to Pocket
EU  Eurozone  debt  debt-overhang  debt-restructuring  sovereign_debt  leverage  deleverage  economic_growth  economic_reform  creditors  default  monetary_policy  ECB  central_banks  interest_rates  investment  deficit_finance  debt_crisis  corporate_finance  demand-side  supply-side  capital_markets  Great_Recession  financial_crisis  financial_system  banking  capital_adequacy  Pocket 
april 2015 by dunnettreader
Steve Cecchetti and Kim Schoenholtz -The mythic quest for early warnings — Money, Banking and Financial Markets - April 2015
Reviews a number of stress indexes developed since the financial crisis -- most show a good way of indicating where we are at any one time, and several may be useful in crisis management for identifying institutions with liquidity vs insolvency problems, but none tell us where we're going **--** Where does this leave us? Our answer is that we have yet another reason to be skeptical of time-varying, discretionary regulatory policy. In an earlier post, we noted that the combination of high information requirements, long transmission lags and significant political resistance made it unlikely time-varying capital requirements will be effective in reducing financial vulnerabilities. Our conclusion then, which we reiterate now, is that the solution is to build a financial system that is safe and resilient all of the time, since we really never know what is coming. That means a regulatory system based on economic function, not legal form, with sufficient capital buffers to guard against all but the very worst possibilities. In the end, a financial system that relies on an early warning indicator of imminent financial collapse seems destined to fail. -- copied to Pocket
financial_system  financial_regulation  financial_crisis  capital_adequacy  capital_markets  NBFI  information-markets  information-asymmetric  risk  risk-systemic  risk_management  Great_Recession  global_governance  banking  bank_runs  liquidity  Pocket 
april 2015 by dunnettreader
Andrew W. Lo, Thomas J. Brennan - Do Labyrinthine Legal Limits on Leverage Lessen the Likelihood of Losses?: An Analytical Framework - Texas Law Review, Vol. 90, No. 7, 2012 :: SSRN
Andrew Lo - Massachusetts Institute of Technology (MIT) - Sloan School of Management; Massachusetts Institute of Technology (MIT) - Computer Science and Artificial Intelligence Laboratory (CSAIL); National Bureau of Economic Research (NBER) *--* Thomas J. Brennan - Northwestern University School of Law. **--** A common theme in the regulation of financial institutions and transactions is leverage constraints. Although such constraints are implemented in various ways — from minimum net capital rules to margin requirements to credit limits — the basic motivation is the same: to limit the potential losses of certain counterparties. However, the emergence of dynamic trading strategies, derivative securities, and other financial innovations poses new challenges to these constraints. We propose a simple analytical framework for specifying leverage constraints that addresses this challenge by explicitly linking the likelihood of financial loss to the behavior of the financial entity under supervision and prevailing market conditions. An immediate implication of this framework is that not all leverage is created equal, and any fixed numerical limit can lead to dramatically different loss probabilities over time and across assets and investment styles. This framework can also be used to investigate the macroprudential policy implications of microprudential regulations through the general-equilibrium impact of leverage constraints on market parameters such as volatility and tail probabilities. -- Pages in PDF File: 36 -- Leverage, Liquidity, Financial Regulation, Capital Requirements, Macroprudential Policies, Net Capital Rules -- downloaded pdf to Note
article  SSRN  financial_system  financial_regulation  financial_crisis  markets-structure  banking  NBFI  shadow_banking  leverage  capital_adequacy  liquidity  capital_markets  money_market  derivatives  arbitrage  macroprudential_policies  macroprudential_regulation  risk-systemic  financial_innovation  bank_runs  downloaded 
april 2015 by dunnettreader
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