Banking

Stress Testing During Times of War

The Covid crisis raises important questions about the role of stress testing during periods of systemic distress. Should stress testing of banks be...

Everything I Know About the Bond Market I Learned from Litwin v. Allen

This essay focuses on the classic 1940 case Litwin v. Allen, 25 N.Y.S.2d 667 (1940), in which the court ruled that directors and officers of a bank were...

Bailout Blues: the Write-Down of the AT1 Bonds in the Credit Suisse Bailout

The recent bailout of Credit Suisse is noteworthy for many reasons. One of them is that, while AT1 bondholders were wiped out, shareholders were not. This...

Corporate Governance of Banks after the Financial Crisis - Theory, Evidence, Reforms

Getting Incentives Right: Is Deferred Bank Executive Compensation Sufficient?

In the wake of the global financial crisis, attention has often focused on whether incentives generated by bank executives? compensation programs led...

Limits of Private Sector Solutions for Banks: Recent UK Rights Issues

This article reviews regulatory concerns prompted by the difficulties that were encountered by four British banks in making rights issues and other pro...

Why High Leverage is Optimal for Banks

Liquidity production is a central role of banks. When there is a market premium for the production of (socially valuable) liquid financial claims and no...

Management Insulation and Bank Failures

How does management insulation from shareholder pressure influence banks’ resilience to crises? To address this question, we develop a...

Corporate Governance of Banks and Financial Institutions: Economic Theory, Supervisory Practice, Evidence and Policy

Banks are special, and so is the corporate governance of banks and other financial institutions as compared with the general corporate governance of...

The Carrot and the Stick: Bank Bailouts and the Disciplining Role of Board Appointments

This paper empirically examines the Capital Purchase program (CPP) under TARP that was used by the U.S. government to bail out distressed banks with...

Banking Stability: The Impact of Financial Sector Heterogeneity on Systemic Risk in Financial Crises and Economic Recessions

Financial institutions’ heterogeneity, a high degree of dissimilarity across multiple dimensions, including business focuses, correlated asset...

Executive Compensation and Corporate Governance in Financial Firms: The Case for Convertible Equity-Based Pay