We develop a model of endogenous lobby formation in which wealth inequalityand political accountability undermine entry and financial development. In-cumbents seek a low level of effective investor protection to prevent potentialentrants from raising capital. They succeed because they can...

Some credit booms result in financial crises. While excessive risk-taking is a plausible cause, many investors do not anticipate increasing risk. We show how credit supply driven booms may be misunderstood as productivity driven, due to opaque bank balance sheets which disguise risk incentives....