This paper reports a new test of capital structure theories. It uses a filtering technique to identify large investment spikes. We find that the spikes are predominantly financed with debt by large firms and with new equity by small firms. In the process of financing large projects, firms move...

This paper analyses collusion-proof multilateral insurance contracts between a risk neutral insurer and multiple risk averse agents in an environment of asymmetric costly state verification.  Optimal contracts involve the group of agents pooling uncertainty and the insurer acting as reinsurer...

We investigate the optimal regulation of financial conglomerates which combine a bank and a non-bank financial institution. The conglomerate`s risk-taking incentives depend upon the level of market discipline it faces, which in turn is determined by the conglomerate`s liability structure. We...

Debating the minutiae of insurance regulation without a clear understanding of why insurance companies are regulated is futile. In this non-technical essay I discuss the economic rationale for insurance business regulation. I conclude that the appropriate role of the regulator in this industry...

In many economic applications involving comparisons of multivariate distributions, supermodularity of an objective function is a natural property for capturing a preference for greater interdependence.  One multivariate distribution dominates another according to the supermodular stochastic...

Funeral insurance has existed at least since antiguity, and it remains popular in many parts of Africa today.  Yet the study of funeral insurance as a distinct form of insurance has hitherto been neglected.  This paper presents a model in which funeral insurance combines regular life insurance...

A funeral is a costly occasion. This paper studies indigenous insurance institutions developed to cope with the high costs of funerals, based on evidence from rural areas in Tanzania and Ethiopia. These institutions are based on well-defined rules and regulations, often offering premium-based...

This paper proposes a "Flexible Disequilibrium Model" (FDM) which allows for a flexible specification of technology and of firm-level heterogeneity in technical and allocative efficiency levels. FDM is implemented on a G-5 banking dataset covering the period 1989-1996. Significant scale...

Sometimes shareholders are better off delegating to a CEO with different objectives than their own. A top manager motivated to share surpluses with workers can encourage union members to adopt efficient production methods. Bond covenants may constrain managers from acquiescing to union wage...

China has sought to improve enterprise performance not through privatisation as in other transition economies, but through corporatisation as means of improving corporate governance. Actual governance practices of corporatised Chinese firms are however seriously defective, characterized by...