Conglomerates, trade credit arrangements, and banks are all instances of financial intermediation. However, these institutions differ significantly in the extent to which the projects financed absorb aggregate intermediary risk, in whether or not intermediation is carried out by a financial...

The paper seeks to characterize what information is always available for contracting, independent of the form of the contract and the probabilities of different states of nature. The paper denotes such information as contractible. It is established that it is possible to speak uniquely of...

A common feature of financial intermediaries is that the welfare of one borrower is adversely affected by the poor performance of other borrowers. That is, there exists a degree of joint liability among the borrowers of a financial intermediary. This paper provides an explanation for this...

The authors use survey data to measure the use of formal and informal sources of financing by owners of small businesses in two ethnic neighborhoods. The authors find substantial differences across ethnic groups in the amount of start-up funding obtained and in the use of trade credit.

This article documents not only the actual use of banks, but also the widespread use of alternative financing mechanisms, using data from a survey of households and businesses in a Hispanic neighborhood of Chicago.

Corruption among court officials varies widely across countries and exhibits considerable intertemporal persistence. I present a model of court corruption in which there are multiple equilibria, differentiated by corruption levels. In the model, courts provide incentives for individuals to...

We analyze a tractable class of multitask principal-agent problems, such as the one faced by a firm with a manager overseeing several projects. We allow for tasks to be complements or substitutes. We avoid the problems associated with the first-order approach by directly characterizing the shape...

Various laws and policy proposals call for regulators to make use of the information reflected in market prices. We focus on a leading example of such a proposal, namely that bank supervision should make use of the market prices of traded bank securities. We study the theoretical underpinnings...

The incentives of a plaintiff in a lawsuit are affected by a variety of legal rules. One leading example is the proportion of the fine imposed on the defendant that is awarded to the plaintiff. Another is the identity of the plaintiff himself: private litigants are motivated by the prospect of...

We study legal restrictions on private contracting in the form of limitations on the severity of non-monetary punishments. We locate the rationale for such restrictions in externalities that parties impose on future relationships: punishments that lower an agent's future productivity may lower...