We show that the correlation across financial institutions is a major force that increases their overall fragility. Our model features a financial system with financial institutions individually prone to runs and interconnected through fire sales. Strategic complementarities within and across...

This paper proposes a macro-banking model with corporate debt choice and investigates the impacts of bank capital regulation. Compared to non-banks, banks provide restructurable debt that resolves firm liquidations. Capital regulation corrects deposit insurance distortions but reduces bank debt...

I investigate the impact of bank capital requirements in a business cycle model with corporate debt choice. Compared to non-bank investors, banks provide restructurable loans that reduce firm bankruptcy losses and enhance production efficiency. Raising capital requirements eliminates deposit...

Financial covenants influence firm behavior by state-contingently allocating decision rights. I develop a quantitative model with long-term debt where shareholders cannot commit to not dilute existing lenders with new debt issuances and risky investments. Lenders intervene upon covenant...

Previous studies of the U.S. market regard short-term reversal as compensation for liquidity provision. However, we find that intraday reversal has no significant dependence on stock liquidity for the Chinese market. Hence, based on a stylized framework, we propose an alternative explanation:...

What drives intraday reversal? Previous studies of the U.S. market regard short-term reversal as compensation for liquidity provision. However, in this paper, we find that intraday reversal has no significant dependence on stock liquidity for the Chinese market. Hence, based on a stylized...