We estimate a structural model of financing choices in presence of managerial moral hazard, financial distress costs and taxes. In the theoretical model, firms with low cost of managerial effort, and high financial distress costs and non--debt tax shields, find it optimal to issue equity....

We study the decision of when to invest in an indivisible project whose value is perfectly observable but driven by a parameter that is unknown to the decision maker ex ante. This problem is equivalent to an optimal stopping problem for a bivariate Markov process. Using filtering and martingale...

We report results of a series of experiments that simulates trading in financial market. The specific format of our experiment allows to unambiguously measure the information content of the order flow and to disentangle the impact that risk attitudes and belief updating rules have on market...

[...]This paper aims to fill that gap by providing a simpleframework for analyzing the interactions between the threepillars of Basel II. We start by offering a critical assessment ofthe academic literature on the three pillars,5 and argue thatnone of the existing models allows for a...

The classical doctrine of the Lender of Last Resort, elaborated by Thornton (1802) and Bagehot (1873), asserts that the Central Bank should lend to “illiquid but solvent” banks under certain conditions. Several authors have argued that this view is now obsolete: when interbank markets are...

Speculative industries exploit novel technologies subject to two risks. First, there is uncertainty about the fundamental value of the innovation: is it strong or fragile? Second, it is difficult to monitor managers, which creates moral hazard. Because of moral hazard, managers earn agency rents...

The classical doctrine of the Lender of Last Resort, elaborated by Thornton (1802) and Bagehot (1873), asserts that the Central Bank should lend to „illiquid but solvent“ banks under certain conditions. Several authors have argued that this view is now obsolete: when interbank markets are...

We analyze the consequences of activism in a regulated industry where the regulator has been captured by the industry. Unlike ordinary economic agents, activists are insensitive to monetary incentives. Moreover, they are less well informed than regulators and their actions generate dead-weight...