Diversified business (or corporate) groups, consisting of legally independent firms operating in multiple markets, are ubiquitous in emerging markets and even in some developed economies. The study of groups, a hybrid organizational form between firm and market, is of relevance to industrial...

We establish an empirical regularity that a weak creditor protection index is associated with high stock price volatility. Using a standard Tobin Q model we demonstrate two distinct mechanisms that are responsible for increased volatility: credit guarantees and weak creditor protection that...

We begin the Paper by laying out a simple methodology that allows us to determine whether firms are credit constrained, based on how they react to changes in directed lending programs. The basic idea is that while both constrained and unconstrained firms may be willing to absorb all the directed...

Lack of access to finance is often cited as a key reason for why poor people remain poor. This Paper uses data on the Indian rural branch expansion programme to provide empirical evidence on this issue. Between 1977 and 1990, the Indian central bank mandated that a commercial bank could open a...

We provide a theory of the determination of exchange rates based on capital flows in imperfect financial markets. Capital flows drive exchange rates by altering the balance sheets of financiers that bear the risks resulting from international imbalances in the demand for financial assets. Such...

Banking systems are fragile not only within one country but also within and across regions. We study the role of regional banking system characteristics for regional banking system fragility. We find that regional banking system fragility reduces when banks in the region jointly hold more liquid...

The paper discusses the policy problems involved in replacing several national currencies with a single currency in a monetary union. While these problems are of general interest, the analysis is motivated by the plan for Economic and Monetary Union among the members of the European Community....

We study the determinants of stock market development and the growing migration of capital raising, listing and trading activity to international exchanges. Economies with higher income per capita, sounder macro policies, more efficient legal systems with better shareholder protection, and more...

We use a controlled economic experiment to examine the implications of asymmetric information for informational linkages between a stock market and a traded call option on that stock. The setting is based on the Kyle model and Back (1993). We find that an insider trades aggressively in both the...

This paper studies international financial integration analyzing firms from various countries raising capital, trading equity, and/or cross-listing in major world stock markets. Using a large sample of 39,517 firms from 111 countries covering the period 1989-2000, we find that, although...