The spectacular failure of top-rated structured finance products has brought renewed attention to the conflicts of interest of Credit Rating Agencies (CRAs). We model both the CRA conflict of understating credit risk to attract more business, and the issuer conflict of purchasing only the most...

In the market for financial services, sellers may have better information than buyers regarding the match between a buyer's needs and the good's characteristics. This may lead to conflicts of interest and/or the underprovision of information by the seller. We compare two firm structures,...

This paper analyzes the transmission mechanisms of monetary policy in a general equilibrium model of securities markets and banking with asymmetric information. Banks' optimal asset/liability policy is such that in equilibrium capital adequacy constraints are always binding. Asymmetric...

In some markets, such as the market for drugs or for financial services, sellers have better information than buyers regarding the matching between the buyer's needs and the good's actual characteristics. Depending on the market structure, this may lead to conflicts of interest and/or the...

This paper proposes a model of financial markets and corporate finance, with asymmetric information and no taxes, where equity issues, Bank debt and Bond financing may all co-exist in equilibrium. The paper emphasizes the relationship Banking aspect of financial intermediation: firms turn to...

This paper proposes a model of financial markets and corporate finance, with asymmetric information and no taxes, where equity issues, bank debt, and bond financing coexist in equilibrium. The relationship banking aspect of financial intermediation is emphasized: firms turn to banks as a source...

The aim of this paper is to examine the pros and cons of book and fair value accounting from the perspective of the theory of banking. We consider the implications of the two accounting methods in an overlapping generations environment. As observed by Allen and Gale (1997), in an overlapping...

We investigate the optimal regulation of financial conglomerates which combine a bank and a non-bank financial institution. The conglomerate's risk-taking incentives depend upon the level of market discipline it faces, which in turn is determined by the conglomerate's liability strucure. We...

The aim of this paper is to examine the pros and cons of book and fair value accounting from the perspective of the theory of banking. Weconsider the implications of the two accounting methods in an overlapping generations environment. As observed by Allen and Gale(1997), in an overlapping...