In this paper I analyze the effects of insider trading on real investment and the insurance role of financial markets. There is a single entrepreneur who, at a first stage, chooses the level of investment in a risky business. At the second stage, an asset with random payoff is issued and then...

The classical doctrine of the Lender of Last Resort, elaborated by Thornton (1802) and Bagehot (1873), asserts that the Central Bank should lend to “illiquid but solvent” banks under certain conditions. Several authors have argued that this view is now obsolete: when interbank markets are...

This paper analyzes decisions regarding the location of headquarters in the U.S. for the period 1996-2001. Using a unique [fi]rm-level database of about 30,000 U.S. headquarters, we study the [fi]rm- and location-speci[fi]c characteristics of headquarters that relocated over that period....

A dynamic market for a risky asset with a continuum of risk averse heterogeneously informed investors and a risk neutral competitive market sector is examined. The market is (semi-strong) informationally efficient due to competitive market making activity. The paper analyzes the effect of...

We develop a model of banking competition for deposits based on modern financial intermediation theory and industrial organization analysis. The standard demand deposit contract makes banks vulnerable to failure and introduces (endogenous) expectations-based vertical differentiation. A...