This paper examines the role of relationship lending using a data set on small firm finance. The abilities to acquire private information over time about borrower quality and to use this information in designing debt contracts largely define the unique nature of commercial banking. Recently, a...

Conventional wisdom in banking suggests a higher capital-asset ratio (CAR) is associated with a lower after-tax return on equity (ROE). Despite the arguments in favor of this hypothesis, data on U.S. banks in the mid- to late-1980s tell a very different story. Bank values of CAR and ROE are...

There have been numerous econometric studies of bank scale and scope economies, efficiency, mergers, and market structure and performance in U.S. banking. According to the authors, these studies have come to the following conclusions:<p> Scale: For the very smallest banks, there are scale economies...</p>

The authors use a specialized revenue function to estimate the revenue economies of scope and determine whether banks providing a broad mix of services are able to capitalize on the potential savings in transaction costs afforded their customers. Bank production costs and consumer consumption...

Traditionally, concerns about market concentration have focused on mispricing and the restriction of output relative to competitive markets. This type of loss is typically measured by the standard welfare triangle. The associated welfare losses usually motivate antitrust policy.<p> <p> This paper...</p></p>

Most of the early studies of bank efficiency focused on scale and product mix efficiency, or how close banks are to producing at the scale or product mix that minimizes costs per unit of output. Despite these past efforts, something rather important is missing from most of the analysis according...

The role of information acquisition for bank regulators is important for the recognition and possible control of bank risk. This role is also consistent with the modern theory of banking under which banks hold a substantial amount of private information about their loan customers, and by...

In this study, we investigate whether managerial specialization leads to significant outperformance of investment trusts. In the existing literature on the performance of mutual funds one of the unsolved puzzles is the persistence of outperformance. We argue that specialization is one of the...

Traditional finance theory based on the assumptions of symmetric information and perfect and competitive markets has provided many important insights. These include the Modigliani and Miller Theorems, the CAPM, the Efficient Markets Hypothesis and continuous time finance. However, many empirical...

The Barings, Daiwa Bank and Sumitomo Corp. financial debacles in the mid-1990s suggest that management failures rather than misfortune, errors, or complexity are a major source of the risk of financial debacles. These errors are systematic and are a concommittant of the structure of trading and...