We develop a model to show how shareholder-creditor agency conflicts interact with accounting measurement rules to influence the design of bank capital regulation. Relative to a benchmark autarkic regime, higher capital requirements mitigate inefficient asset substitution, but exacerbate...

We develop a general equilibrium model of competitive banks to examine the optimal design of bank regulation. There is a continuum of equilibria of the unregulated economy that feature varying relative sizes of the financial and real sectors. The unregulated economy underinvests (overinvests) in...

We provide a novel explanation for the low volume of securitization in catastrophe risk transfer. Insurers' risk transfer choices trade off the lower signaling costs of reinsurance against the additional costs of reinsurance stemming from reinsurers' market power, higher costs of capital, and...

We show how product market competition affects capital structure by developing a tractable model that embeds the tradeoff between the tax benefits and bankruptcy costs of debt in an industry equilibrium setting with heterogeneous, imperfectly competitive firms. Different determinants of...

We develop a dynamic equilibrium model to derive testable time-series and cross-sectional implications for the endogenous relations among ownership concentration, managerial incentives, and asset prices. For a given firm at any date, ownership concentration is positively related to managerial...

We develop a tractable general equilibrium model to analyze credit risk sharing via credit default swaps (CDS) and CDS market regulation under aggregate uncertainty. If available equity capital is below a threshold, any equilibrium of the basic economy with no CDS markets features firm default...