This paper develops and tests a recursive model of debt issuance and rating migration. We examine a signaling game with firms who have private information about their probability distribution of future rating migration. A key assumption of the model is that rating agencies reveal information...

This paper tests a new hypothesis that bank managers issue bonds, at least in part, to convey positive, private information and refrain from issuance to hide negative, private information. We find evidence for this hypothesis, using rating migrations, equity returns, bond issuance, and balance...

This paper tests a new hypothesis that bank managers issue public debt, at least in part, to convey positive, private information and refrain from issuance to hide negative, private information. This positive selection hypothesis is tested against the traditional adverse selection hypothesis. We...

We investigate how banking market competition, informational opacity, and sensitivity to shocks have changed over the last three decades by examining the persistence of firm-level rents. We develop propagation mechanisms with testable implications to isolate the sources of persistence. Our...

This paper describes a feedback effect between real and financial development. The paper presents a new variable, which we call the cost of financial intermediation, through which the feedback between finance and growth operates. The theoretical part of the paper describes how specialization of...