Acharya, Viral; Naqvi, Hassan - In: Journal of Financial Economics 106 (2012) 2, pp. 349-366
We examine how the banking sector could ignite the formation of asset price bubbles when there is access to abundant liquidity. Inside banks, to induce effort, loan officers are compensated based on the volume of loans. Volume-based compensation also induces greater risk taking; however, due to...