Manipulation of hard information has been at the center of a wave of investigations into fraudulent bank behavior, such as mis-selling of mortgages and rigging of LIBOR and FX rates. Despite these prominent cases, little is known as to why employees manipulate hard information. Using almost a...

Poor loan quality is often attributed to loan officers exercising poor judgment. A potential solution is to base loans on hard information alone. However, we find other consequences of bypassing discretion stemming from loan officer incentives and limits of hard information verifiability. Using...

Poor loan quality is often attributed to loan officers exercising poor judgment. A potential solution is to base loans on hard information alone. However, we find other consequences of bypassing discretion stemming from loan officer incentives and limits of hard information verifiability. Using...

Violations of financial covenants shift control rights to lenders. When borrowers have lending relationships with these lenders in control, they experience not only smaller declines in investment, but also lesser deteriorations in both firm survival prob- abilities and in sales. These effects...

This article discusses the treatment of fixed capital in Classical theory of price. Sraffa uses non-linear depreciation of “physical” capital that equalizes all annual profit rates individually, but violates the proportionality of monetary machine value reduction and physical use-up on an...