We show that creditors do not just ensure that inefficient investment is not undertaken, but also do not preclude efficient investment. Examining what happens following a debt covenant violation, a situation through which creditors acquire some control rights over the firm, we find that...

This article investigates minority expropriation in closely-held firms. Using a sample of Spanish firms for the period from 1996 to 2006, we find that firms that are more vulnerable to minority expropriation have blockholders controlling groups with aggregate equity stakes that are far removed...

This paper studies the incentives of rating agencies to reveal the information that they obtain about their client firms. In the model, rating agencies seek to maximize their reputation and protect their market power. They observe public information and obtain either precise or noisy private...

This paper examines the reliability of information provided by certification intermediaries, such as rating agencies in the context of both a monopolistic and a duopolistic certification industry. It demonstrates that, in a simple model where the intermediary is concerned about reputation and...

This paper examines to what extent reputational concerns give rating agencies incentives to reveal information. It demonstrates that, in a simple model in which a rating agency has public and private information about a project, it may ignore private information and even contradict public...

We estimate the extent to which idiosyncratic and disaggregate macro shocks (such as regional and industry shocks) are not shared in the economy. Comparing the degree to which idiosyncratic and disaggregate macro shocks are not shared grants a deeper understanding as to why the economy lacks in...

This paper looks at the advantages and disadvantages of mixing banking and commerce, using the "liquidity" approach to financial intermediation. Adding a commercial firm makes it easier for a bank to dispose of assets seized in a loan default. This 'internal market' increases the liquidity of...