Risk-shifting occurs when creditors or guarantors are exposed to loss without receiving adequate compensation. This paper seeks to measure and compare how well authorities in 56 countries controlled bank risk shifting during the 1990s. Although significant risk shifting occurs on average,...

This paper proposes a theoretically sound and easy-to-implement way to measure the systemic risk of financial institutions using publicly available accounting and stock market data. The measure models credit risk of banks as a put option on bank assets, a tradition that originated with Merton...

Mispriced and misadministered deposit insurance imparts risk-shifting incentives to U.S. banks. Regulators are expected to monitor and discipline increases in bank risk exposure that would transfer wealth from the FDIC to bank stockholders. This paper assesses the success regulators had in...

This paper provides a comprehensive, global database of deposit insurance arrangements as of 2013. We extend our earlier dataset by including recent adopters of deposit insurance and information on the use of government guarantees on banks' assets and liabilities, including during the recent...

This paper identifies factors that influence decisions about a country's financial safety net, using a comprehensive dataset covering 180 countries during the 1960-2003 period. Our analysis focuses on how private interest-group pressures, outside influences, and political-institutional factors...

Default probability plays a central role in the static tradeoff theory of capital structure. We directly test this theory by regressing the probability of default on proxies for costs and benefits of debt. Contrary to predictions of the theory, firms with higher bankruptcy costs, i.e., smaller...

This paper assesses the probable impact on S&Ls' profitability and participation in mortgage markets of The Depository Institutions Deregulation and Monetary Control Act of 1980. It tracks inflation-induced secular declines in the value of S&L mortgage holdings between 1965 and 1979 and...

Considered as a social contract, a financial safety net imposes duties and confers rights on different sectors of the economy. Within a nation, elements of incompleteness inherent in this contract generate principal-agent conflicts that are mitigated by formal agreements, norms, laws, and the...

Although nation-based systems of financial regulation constitute a second-best approach to global welfare maximization, treacherous accountability problems must be acknowledged and resolved before regulatory cooperation can deal fairly and efficiently with cross-border issues. To track and...

As financial institutions and markets transact more and more cross-border business, gaps and flaws in national safety nets become more consequential. Because citizens of host (home) countries may be made to pay for mistakes made in the home (host) country, Basel's lead-regulator paradigm...