Job rotation, where a principal routinely rotates agents among tasks, is argued to be a powerful antidote for agency problems inside an organization. However, when soft information dominates transactions inside a firm, verifying the information set that led to a particular decision becomes...

This paper discusses how Contingent Convertible Bonds (CCB) influence the risk-taking behaviour of managers. A methodology to measure the impact is presented. The results show that the decision of issuing CCB to finance the firm's assets sets incentives to managers to increase risk, in case the...

Bilateral derivatives valuation is subject to counterparty credit risk (CCR) in that a counterparty could jump to default or its credit spread could vary over time. In the nomenclature of risk management, the former is called CCR exposure and the later leads to credit valuation adjustment (CVA)....

Basel III requires countercyclical capital buffers to protect the banking system from periods of excessive credit growth and leverage buildup. In this paper, I provide a rationale for time-varying capital requirements in a dynamic general equilibrium setting. An optimal policy trades off reduced...

In this paper we use a novel approach to address issues of endogeneity in estimating a causal effect of leverage on risk taking by banks. Using data on local bank office deposits and local unemployment we construct an instrument to use in a regression of leverage on a measure of risk taking...

I develop a structural model of mortgage demand and lender competition to study how leverage regulation affects the equilibrium in the UK mortgage market. Using variation in risk-weighted capital requirements across lenders and across mortgages with differential loan-to-values, I show that a...

We investigate the effect of the power of creditors, property rights protection, and institutional quality, on bank profits using a panel of 498 banks from 46 countries. Results show that better institutions and stronger property rights protection reduce bank profits, while stronger power of...

This article examines the regulatory challenges raised by recent, overlooked changes in insurance markets that have led to a functional convergence between insurance and the broader financial sector.The law literature on financial regulation last addressed the issue of convergence over a decade...

Failures of banks' governance and risk management functions have been identified as key causes of the 2007-2008 financial crisis. This article reviews the empirical literature that investigates the relationship between governance structures and risk management functions as well as their impact...

In the wake of the 2008 financial crisis, Robert Engle and colleagues at New York University developed the NYU Stern Systematic Risk Model (SRISK), a market-based substitute for regulatory measures of systemic risk of financial institutions. This study identifies four shortcomings of SRISK....