This paper explains why banks derive a benefit from being highly interconnected. We show that when banks are protected by government guarantees they can significantly increase their expected returns by channeling funds ...

This paper proposes a new regulatory approach that implements capital requirements contingent on executive incentive schemes. We argue that excessive risk-taking in the financial sector originates from the shareholder moral ...

This paper analyzes how on-the-job search (OJS) by an agent impacts the moral hazard problem in a repeated principal-agent relationship. OJS is found to constitute a source of agency costs because efficient search incentives ...

Previous research has documented strong peer effects in risk taking, but little is known about how such social influences affect market outcomes. Since the consequences of social interactions are hard to isolate in financial ...

In an experimental setting in which investors can entrust their money to traders, we investigate how compensation schemes affect liquidity provision and asset prices. Investors face a trade-off between risk and return. At ...

We examine what an applicant’s vita signals to potential employers about her willingness to cooperate in teams. Intensive social engagement may credibly reveal that an applicant cares about the well-being of others and ...

Private equity fund managers are typically required to invest their own money alongside the fund. We examine how this coinvestment affects the acquisition strategy of leveraged buyout funds. In a simple model, where the ...

We investigate the role of competition on the outcome of Austrian Treasury auctions. Austria's EU accession led to an increase in the number of banks participating in treasury auctions. We use structural estimates of ...

This paper provides a complete characterization of optimal contracts in principal-agent settings where the agent's action has persistent effects. We model general information environments via the stochastic process of the ...

Using a unique confidential contract level dataset merged with firm-level asset price data, we find robust evidence that firms' stock market valuations and employment levels respond more to monetary policy announcements ...