The financial crisis has generated fundamental reforms in the financial regulatory system in the U.S. and internationally. Much of this reform was in direct response to the weaknesses revealed in the precrisis system. The new “macroprudential” approach to financial regulations focuses on...

The paper develops a model of foreign direct investments (FDI) and foreign portfolio investments (FPI). FDI is characterized by hands-on management style which enables the owner to obtain relatively refined information about the productivity of the firm. This superiority, relative to FPI, comes...

There are two basic approaches to explaining financial crises. One argues that they are driven by bad fundamentals, while the other one argues that they reflect panic or coordination failures among investors. The empirical literature has established a fairly strong link between fundamentals and...

FDI investors control the management of the firms, whereas FPI investors delegate decisions to managers. Therefore, direct investors are more informed than portfolio investors about the prospects of projects. This information enables them to manage their projects more efficiently. However, if...