The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 limits thrift goodwill that can be counted as regulatory capital. This paper examines if and why the goodwill clause adversely affected the market value of thrifts. Main findings are that good will had a large negative...

In moral hazard models, bank shareholders have incentives to transfer wealth from the deposit insurer - that is, maximize put option value - by pursuing riskier strategies. For safe banks with large charter value, however, the risk-taking incentive is outweighed by the possibility of losing...

This paper examines the effects of bank risk, estimated as the probability of failure based on actual failure records, on the interest rate and the growth of large time deposits between 1985 and 1992. During the period, riskier banks paid higher interest rates but experienced slower growth of...

This paper tests for the presence of depositor discipline by examining the effects of depository institutions' risk on the pricing and growth of uninsured deposits. The study analyzes a large panel of thrifts that includes detailed information on each firm's deposit rate schedules, balance sheet...

Yields on long-term municipal bonds reflect both current and expected future tax rates. This paper derives expected changes in tax rates from yields on short- and long-term municipal bonds and examines the relationship between expected changes in tax rates and the financial condition of the...

This paper derives conditions under which concerns about relative income cause an individual's optimal share of the risky investment to increase with the aggregate share (rational herding). The model uses a measure of relative income that can flexibly capture the effects of both consumption...

The current review of the 1988 Basel Capital Accord has put the spotlight on the ratios used to assess banks' capital adequacy. This article examines the effectiveness of three capital ratios - the first based on leverage, the second on gross revenues, and the third on risk-weighted assets - in...