While credit default swaps (CDS) can be used to hedge credit risk exposures or to speculate, we examine another use of them: banks buy CDS referencing their borrowers to obtain regulatory capital relief. Such capital relief activities have unintended consequences, as banks extend riskier loans...

While credit default swaps (CDS) can be used to hedge credit risk exposures or to speculate, we examine another use of them: banks buy CDS referencing their borrowers to obtain regulatory capital relief. Such capital relief activities have unintended consequences, as banks extend riskier loans...

Employee treatment is a dilemma for many business owners and executives: while everyone prefers a pleasant working environment, satisfying employee needs can be costly to shareholders. Given such costs, is it still worthwhile to make employees happy on a daily basis? This study provides evidence...

The rise of credit default swaps (CDS) provides creditors with a market-based approach to obtaining protection, but it can also affect lenders' monitoring of the borrowers. We find that after CDS begin trading on a given firm, new loans to that firm are less likely to require collateral and have...

Third-party loan guarantees are prevalent for the bank loans made in China. We study the economics of third-party loan guarantees using data from a large and legitimate loan guarantee firm. We show that guarantors provide useful information about the borrowers. We conclude that the loan...