Hidden capital exists whenever the accounting measure of a firm's net worth diverges from its economic value. Such unbooked capital has on-balance-sheet and off-balance-sheet sources. This paper develops a model to estimate both forms of hidden capital and to test hypotheses about their...

New legislation and traditional FDIC insolvency-resolution procedures transform and intensify the principal-agent problems most responsible for the FSLIC mess. These problems explain counterproductive constraints on the governance and operating policies of the agency responsible for rescuing and...

Unless priced and administered appropriately, a governmental safety net enhances risk-shifting opportunities for banks. This paper quantifies regulatory efforts to use capital requirements to control risk-shifting by U.S. banks during 1985 to 1994 and investigates how much risk-based capital...