While the importance of bank-firm relationships is well documented in the banking literature, there is relatively little research on the importance of retail banking relationships. In this paper we collect proprietary data from multiple sources to analyze the importance of retail banking...

Outside monitors provide important information that can help stockholders, creditors, regulators and other stakeholders apply market discipline. In the banking industry, government examiners are an additional outside monitor but with one important difference: bank examination ratings are not...

The Basel II Advanced Internal Ratings (AIRB) approach is compared to capital requirements set using an equilibrium structural credit risk model. Analysis shows the AIRB approach undercapitalizes credit risk relative to regulatory targets and allows wide variation in capital requirements for a...

In this paper we examine whether the intensity of banking relationships, measured by the number of banks with which a firm does business, benefits firms by making credit more available during periods of financial stress. We model credit availability to be determined jointly with the decision to...

Though uninsured depositors are recognized as a source of market discipline, the possible disciplinary effect of decisions made by fully insured depositors have gone largely unexamined. Using proprietary administrative deposit data at the account level, this paper analyzes depositor behavior at...

Capital allocation rules are derived that maximize leverage while maintaining a target solvency rate for credit portfolios where risk is driven by a single common factor and idiosyncratic risk is fully diversified. Equilibrium conditions ensure that capital allocations depend on interest...

Credit default swaps (CDS) are similar to out-of-the-money put options in that both offer a low cost and effective protection against downside risk. This study investigates whether put option-implied volatility is an important determinant of CDS pricing. Using a large sample of firms with both...

CDFIs serve an important social function because they provide access to financial services to underserved low-income individuals and households. Understanding which governance mechanisms promote efficient use of scarce resources that these organizations control is important because only...

Using a novel measure of the degree of information asymmetry across firms, this study shows that information-related financial market imperfections do matter for a firm's access to external finance. Prior studies of the importance of liquidity constraints faced by nonfinancial firms have...