optimal labour contracts when workers have a variety of privately observed reservation wages if a firm does not know the individual ex post outside opportunities of its contracted workforce then it can use hours wages and redundancy payments to screen them will a second best contract have underemployment inefficiency or overemployment and with a stochastic contract are those workers randomly selected for layoff worse off than their retained colleagues involuntary layoff or vice versa involuntary retention the answers depend on the nature of the workers preferences two polar cases are looked at corresponding to permanent and temporary layoff the former is characterized by overemployment and involuntary retention the latter by underemployment and involuntary layoff also examined are simple contracts where all retained workers are paid a common wage and all laid off workers receive a common redundancy payment handling asymmetric information in stochastic contracts has led to two technical innovations first a number of results are proved even though all the truth telling constraints are explicitly included second a new regularity condition is found under which the local constraints are sufficient to ensure global incentive compatibility at an optimum

a test of the law of one price in retail banking this paper investigates the level and the determinants of retail banking interest rate differences among spanish banks in the period 1989 2003 we find that the interest rates of twenty five different bank loan and deposit products adjust rather rapidly to their long term values in response to external shocks as the relative version of the law of one price predicts but the evidence runs contrary to the absolute version of the law credit risk premium part of the marginal cost of the loans granted by a particular bank is an important source of interest rate dispersion across banks and loan products both before and after spain joined the euro zone therefore differences in credit risk policies across banks must be taken into account when forming expectations about european retail banking integration

general training in labor markets common value auctions with unobservable investment abstract this paper studies the puzzle of employer financing for the general training of workers a parsimonious theory is developed based on asymmetric information between employers about the quantity of training the labor market is modeled as a common value auction with an informed and an uninformed bidder the novel feature of the game is that one of the bidders can make an unobservable investment that increases the value of the item before the auction by randomizing the amount of training provided an employer can create an endogenous adverse selection problem enabling it to compress the wage structure and capture some returns from its training investment the model generates continuous equilibrium wage and training distributions and identical employees can receive different wage offers and training levels a parametric example is used to illustrate how the shape of the wage distribution depends on the elasticity of production with respect to human capital

labour market deregulation flexibility and innovation labour flexibility is often portrayed as important to competitive success using evidence from an original survey of uk firms this paper investigates the relationships between firms use of on the one hand various flexible work practices human resource management techniques and industrial relations systems and on the other hand the innovative activities of those firms our results suggest that the sort of low road labour flexibility practices encouraged by labour market deregulation short term and temporary contracts a lack of employer commitment to job security low levels of training and so on are negatively correlated with innovation

price setting power vs private information an experimental evaluation of their impact on holdup abstract this paper investigates the extent of the holdup problem in a buyer seller relationship in which the seller has private information about his alternative opportunities theory predicts that compared to a situation in which outside options are publicly observed the seller obtains an informational rent whereas the buyer bears an informational loss as a result the seller is predicted to invest more while the buyer is expected to invest less in contrast to this private information has no impact on the investment levels observed in the experiment but actual investments do increase with the price setting power of the investor these findings are roughly consistent with a model in which agents are inequality averse overall the results question some recent theoretical suggestions that private information rents might substitute for price setting power in mitigating holdup

the effects of unions on investment and innovation evidence from wirs the above is representative of much popular discussion of the effects of unions on investment and innovation in the professional literature the view that unions deter investment by expropriating quasi rents is also commonplace see e g simons i944 baldwin i983 grout i984 in addition it is argued that union foisted restrictive work practices might make investment a more costly process see e g denny and nickell i989 in recent years the above theoretical notions have appeared to receive some empirical support in that in the united states the level of the investment capital ratio does appear to be lower in union firms see hirsch i988 and references therein in this paper we use information contained in the i 984 workplace industrial relations survey in order to investigate the actual impact of unions on investment the rest of the paper is organised as follows in section i i we informally review the alternative channels through which unions might affect investment section i 2 contains a simple theoretical model of investment which embodies all the alternative channels our results are to be found in section ii and finally some conclusions are contained in section iii

law finance and innovation the dark side of shareholder protection proponents of minority shareholder protection state that national legal institutions protecting small investors boost stock markets and in turn the long term performance of countries in this paper we empirically challenge this argument we perform three stage least squares estimation on a sample of 48 countries during 1993 2006 and find that countries with stronger shareholder protection tend to have larger market capitalisation but also lower innovative activity we cope with stock market endogeneity and industry heterogeneity and circumvent omitted variables bias so that this finding is unlikely to be driven by misspecification problems the estimation results are interpreted arguing that stronger shareholder protection may depress rather than encourage the most valuable corporate productions because it enables small and diversified shareholders to play opportunistic actions against undiversified stockholders after specific investments are undertaken by the company innovative activity largely based on specific investing is particularly exposed to this problem copyright oxford university press

labor flexibility and innovation in new ventures the study investigates how labor flexibility affects innovation in new ventures more specifically drawing upon a sample of 143 greek ventures less than 8 years old it examines empirically the individual and interactive effects of functional and numerical flexibility on product innovation it also considers how these effects are moderated by the entrepreneur s political skill results suggest that functional flexibility has a positive direct effect on incremental innovation whereas numerical flexibility has a positive direct effect on radical innovation the interactions between numerical and functional flexibility affect both types of innovation the results also suggest that the labor flexibility innovation relationship is positively moderated by the entrepreneur s political skill these findings point toward aspects of knowledge related with flexible labor engagement and entrepreneurial relational capital that affect innovation

banking deregulation allocational consequences of relaxing entry barriers abstract we present an equilibrium analysis to predict the long run allocational consequences and risk implications of banking deregulation loan demand and deposit supply functions are derived from primitive assumptions about the preferences of individuals and banks are viewed as differentiated competitors in a spatial context we find that a relaxation of entry barriers into banking improves the welfare of borrowers and savers at the expense of bank stockholders equilibrium loan interest rates fall and equilibrium deposit interest rates rise as banking becomes more competitive despite this the equilibrium debt equity ratios of banks increase as entry barriers are relaxed we also examine the implications of capital standards and find that an increase in the minimum capital requirement benefits borrowers but hurts depositors

information gathering transaction costs and the property rights approach the property rights approach to the theory of the firm suggests that ownership structures are chosen in order to provide ex ante investment incentives while bargaining is ex post efficient in contrast transaction cost economics emphasizes ex post inefficiencies in the present paper a party may invest and acquire private information about the default payoff that it can realize on its own inefficient rent seeking can overturn prominent implications of the property rights theory in particular ownership by party b may be optimal even though only the indispensable party a makes an investment decision

on the contagion effect in the us banking sector by using the spatial econometrics methodology this paper investigates the contagion of the risk taking by banks in the us banking sector during 2001 to 2012 in addition the contagion signals up to the subprime crisis in 2008 are analyzed and different channels of contagion are studied in order to identify fragile groups of banks our analysis reveals that there is no significant contagion transmitted to the whole banking system however we observe that the bank contagion is significantly spread locally and for the group of banks that share similar characteristics related to size and bank regulations

weaker jobs weaker innovation exploring the effects of temporary employment on new products this work explores the relationship between temporary employment and product innovation focusing on five major european economies france germany italy spain and the netherlands observed betwee

the effects of formal and informal contracting in credit availability this paper investigates how the use of collateral formal contracting along with the market power of banks which facilitates relational contracts affects the availability of credit for business firms using loan data from the spanish credit register we show that the average credit quality of borrowers in a provincial market decreases with market concentration and the availability of collateral additionally the marginal effect of each variable decreases with the higher values of the other variable we also find that credit line interest rates increase with the availability of collateral although the increase is lower for banks operating in more concentrated credit markets therefore market power relations and collateral formal contracting act as substitutes to increase the availability of bank finance under asymmetric information

deregulation market power and risk behaviour in spanish banks abstract this paper provides empirical evidence on the effects of regulatory changes in the market power of spanish banks it also analyses the response of banks in terms of risk taking behaviour as a result of a reduction in economic profits we find that liberalisation measures have increased competition and eroded banks market power we observe that banks with lower charter values tend to have lower equity assets ratios lower solvency and to experience higher credit risk the last evidence is new in the literature and calls for strengthening regulatory concerns about credit risk management by banks in situations of increased competition

do more competitive banks have less market power the evidence from central and eastern europe abstract studies that have explored the competitive behaviour of banks frequently arrive at divergent conclusions because they use different measures of competition this study first discusses these various measures of competition and their divergence from a theoretical perspective and then employs them to measure the competitiveness of central and eastern european banks and to investigate whether more competitive banks really have less market power we find that these banks increase their market power when there is low banking concentration and do not necessarily become less competitive moreover a more concentrated banking market does not enhance the market power of banks and does not make them less competitive and more competitive banks do not necessarily have less market power this latter outcome ensues because revenue and production reactions to cost evolution are either positively related or completely unrelated to the competitive behaviour of banks

on countervailing incentives abstract this paper extends and unifies previous work on optimal contracts under countervailing incentives shedding light in particular on the relation between countervailing incentives and pooling inflexible rules our main result is that the nature of the optimal contract depends crucially on whether the agent s utility is quasiconcave or quasiconvex in the private parameter the optimal contract is separated in the former case and it may entail pooling in the latter case journal of economic literature classification number d82

information revelation in the property right theory of the firms abstract i incorporate revelation of asymmetric information through shared ownership partnership into the property right theory of the firms shared ownership is optimal as a joint result of mitigating hold up and inducing truthful information revelation due to the incomplete contracting nature shared ownership is incentive compatible if it induces truthful information revelation within the relationship as well as when the relationship breaks off the equilibrium path incentive compatibility results in the optimality of partnership even for the most efficient type of the informed party inefficient investment thus arises the level of shared ownership depends on the relative magnitude of the information rent effect and the hold up effect shared ownership is robust to semi truthful information revelation under which hold up occurs in equilibrium with an endogenously determined probability related to the revelation strategy

ex ante investment ex post adaptation and joint ownership abstract this study extends the property rights theory prt model by introducing an ex post adaptation to changes in trade circumstances we show that if uncertainty is sufficiently high joint ownership can facilitate both ex ante investment and ex post adaptation

transaction costs and the property rights approach to the theory of the firm the standard property rights approach is focused on ex ante investment incentives while there are no transaction costs that might restrain ex post negotiations we explore the implications of such transaction costs prominent conclusions of the property rights theory may be overturned a party may have stronger investment incentives when a non investing party is the owner and joint ownership can be the uniquely optimal ownership structure intuitively an ownership structure that is unattractive in the standard model may now be desirable because it implies large gains from trade such that the parties are more inclined to incur the transaction costs

regulation and market power in the spanish liquefied petroleum gas industry progress or failure this paper presents a detailed study of the structure market power and competition in the distribution sector for liquefied petroleum gas lpg within spain it is a segment of energy consumption and supply that is not often given serious attention despite the fact that lpg is a crucial source of energy to many households in many countries in europe and in the rest of the world despite formally being an open and liberalized sector the spanish lpg market is characterized by high concentration within the industry repsol butano the dominant operator practically controls the entire value chain these structural characteristics probably justify state intervention in the form of price fixing in order to guarantee accessible prices for final consumers nevertheless applying this tool has had negative effects on the opening and liberalization process on the one hand it fails to encourage entry or an increase in the participation of new operators on the other it has considerably deteriorated the economic and financial performance of the distribution agents that are subjected to two strong forces first the dominant operator looks after its own interests and its income and second the government tries to defend the interests of final consumers by fixing prices that inadequately remunerate the activity this shows the contradictory regulatory actions that try to promote competition and then establish mechanisms to regulate activity by fixing prices that act as price limits these government set prices discourage new competitors from entering

schumpeterian patterns of innovation using patent data for four countries germany france united kingdom and italy for the period 1968 1986 the authors find that the patterns of innovative activities differ systematically across technological classes while remarkable similarities emerge across countries in the patterns of innovative activities for each technological class this result strongly suggests that technological imperatives and technology specific factors closely linked to technological regimes play a major role in determining the patterns of innovative activities across countries schumpeter proposed two major patterns of innovative activities the first one labelled by nelson and winter 1982 and kamien and schwartz 1982 as schumpeter mark i is proposed in the theory of economic development 1934 in this work schumpeter examined the typical european industrial structure of the late nineteenth century characterised by many small firms according to this view the pattern of innovative activity is characterised by technological ease of entry in an industry and by a major role played by new firms in innovative activities new entrepreneurs come in an industry with new ideas new products or new processes launch new enterprises which challenge established firms and thus continuously disrupt the current ways of production organisation and distribution and wipe out the quasi rents associated with previous innovations the second one labelled schumpeter mark ii is proposed in capitalism socialism and democracy 1942 in this work inspired by the features of the american industry of the first half of the twentieth century schumpeter discussed the relevance of the industrial r d laboratory for technological innovation and the key role of large firms according to this view the pattern of innovative activities is characterised by the prevalence of large established firms and by relevant barriers to entry for new innovators large firms have institutionalised the innovation process with the creation of r d laboratories filled with researchers technicians and engineers with their accumulated stock of knowledge in specific technological areas their advanced competence in large scale r d projects production and distribution and their relevant financial resources they create barriers to entry to new entrepreneurs and small firms

imperfect competition risk taking and regulation in banking abstract we asses the welfare implications of banking competition under various deposit insurance regimes in a model of imperfect competition with social failure costs and where banks are subject to limited liability we study the links between competition for deposits and risk taking incentives and conclude that the welfare performance of the market and the appropriateness of alternative regulatory measures depend on the degree of rivalry and the deposit insurance regime specifically when competition is intense and the social failure costs high deposit rates are excessive both in a free market and with risk based insurance if insurance premiums are insensitive to risk then the same is true even if there is no social cost of failure we find also that in an uninsured market with nonobservable portfolio risk or with flat premium deposit insurance deposit regulation rate regulation or deposit limits and direct asset restrictions are complementary tools to improve welfare in an uninsured market with observable portfolio risk or with risk based insurance deposit regulation may be a sufficient instrument to improve welfare

the role of the agent s outside options in principal agent relationships abstract we consider a principal agent model of adverse selection where in order to trade with the principal the agent must undertake a relationship specific investment which affects his outside option to trade i e the payoff that he can obtain by trading with an alternative principal this creates a distinction between the agent s ex ante before investment and ex post after investment outside options to trade we investigate the consequences of this distinction and show that whenever an agent s ex ante and ex post outside options differ this may equip the principal with an additional tool for screening among different agent types by randomizing over the probability with which trade occurs once the agent has undertaken the investment in turn this may enhance the efficiency of the optimal second best contract

investments as signals of outside options consider a seller who can make an observable but non contractible investment to improve an intermediate good that is specialized to a particular buyer s needs the buyer then makes a take it or leave it offer to the seller the seller has private information about the fraction of the ex post surplus that he can realize on his own compared to a situation with complete information additional investment incentives are generated by the seller s desire to pretend a strong outside option on the other hand ex post efficiency is not attained whenever the buyer mistakenly tries to call the seller s bluff with a low offer

participation constraints in adverse selection models abstract this paper characterizes the optimal contract offered by an uninformed principal to an informed agent when the latter s reservation utility depends on his type the informational rent is nonmonotonic so that interior types may have a vanishing rent or be excluded from trade the paper identifies conditions for the optimal contract to be separating to be nonstochastic and to induce full participation it also discusses the nature of the solution when bunching occurs the results are applied to nonlinear pricing under price cap regulation and bypass competition and to competition in nonlinear pricing journal of economic literature classification numbers d82 d42 d23 d78 l51 l15

scientific labour markets networks and regional innovation systems lawton smith h and waters r scientific labour markets networks and regional innovation systems regional studies while quality of the labour force in a locality is the single most important component of local competitiveness the regional innovation systems literature has relatively neglected processes of labour force development this paper addresses two questions what is the role of labour markets in the making of regions as innovative systems and what is the role of labour markets in regional innovation systems the labour market and specifically the networks that exist between highly skilled workers are positioned at the centre of the analysis using evidence from the uk high technology economies of cambridgeshire and oxfordshire lawton smith h and waters r lawton smith h et wat

economic value competition and financial distress in the european banking system abstract in this paper we examine the impact of a large number of factors at the bank level liquidity and credit risks asset size income diversification and market power at the industry level banking concentration and macro level real gdp growth on bank financial distress using an unbalanced panel of 308 european commercial banks between 1996 and 2009 the observations falling below a given threshold of the empirical distribution of the shareholder value ratio proxy bank financial distress we employ a panel probit regression and given the presence of overlapping data giving rise to residual autocorrelation we use the bertschek and lechner 1998 robust estimator of the covariance matrix of parameters we show that credit risk liquidity risk and bank market power are the most influential determinants of distressed shareholder value ratio finally we evaluate the model out sample forecasting performance over the 2008 2009 crisis period

bank size and risk taking under basel ii this paper discusses the relationship between bank size and risk taking under pillar i of the new basel capital accord using a model with imperfect competition and moral hazard we find that small banks and hence small borrowers may profit from the introduction of an internal ratings based irb approach if this approach is applied uniformly across banks however the banks right to choose between the standardized and the irb approaches unambiguously hurts small banks who are pushed towards higher risk taking due to fiercer competition this may even lead to higher aggregate risk in the economy

public goods and the hold up problem under asymmetric information an agent can make an observable but non contractible investment a principal then offers to collaborate with the agent to provide a public good private information of the agent about his valuation may either decrease or increase his investment incentives depending on whether he learns his type before or after the investment stage

toward an economic theory of leadership leading by example this paper explores leadership within organizations leadership is distinct from authority because following a leader is a voluntary rather than coerced activity of the followers this paper considers how a leader induces rational agents to follow her in situations when the leader has incentives to mislead them copyright 1998 by american economic association

deregulation and bank financial policy the standard view that banks can value maximize by exploiting non risk rated deposit insurance ignores the potential loss of a valuable bank charter due to insolvency recognition of this effect changes the bank s optimal financial policy and can induce extreme risk averting as well as risk taking behavior however as the value of the bank charter falls the risk taking strategy is more apt to dominate therefore current deregulation of the banking industry by easing entry and devaluing charters holds the potential for increases in the incidence of insolvency unless offsetting policies are instituted

spatial competition in the banking system localization cross subsidies and the regulation of deposit rates abstract the paper analyses a spatial competition model of the banking sector banks offer two kind of services deposits and credit and can either borrow or lend on the money market we investigate the consequences of the regulation of rates paid on deposits the main conclusions are as follows regulation first increases network size beyond social optimum in the long run it results in lower equilibrium credit rates because of increased competition secondly regulation generates tied sales contracts by which banks propose bundles of credit and deposit services tied sales in turn motivate the introduction of cross subsidies between the two activities the rent levied upon regulated deposits financing lower rates in the credit market finally it is shown that in a regulated environment the effectiveness of monetary policy is reduced in the sense that fluctuations of money market rates are less than fully transmitted in credit rates

information reusability competition and bank asset quality this paper explains the recent decline in bank asset quality using the notion of information reusability banks are viewed as information processors they exist because of their advantage in extracting the surplus associated with the reusability of borrower specific information it is shown that a bank s incentive to screen loan applicants and hence maintain the quality of its assets depends on the surplus this screening can produce which in turn depends on information reusability two recent changes in banks operating environment are increased competitition and greater temporal volatility in borrower credit risks the former has directly reduced banks informational surplus while the latter has impaired information reusability hence screening expenditures have been reduced and the diminution of screening has lowered the quality of bank assets it is also shown that an increase in deposit insurance premia has an effect similar to that of narrowing interest spreads and therefore will result in reduced asset screening and impaired asset quality

unobservable investment and the hold up problem we study a two person bargaining problem in which the buyer may invest and increase his valuation of the object before bargaining we show that if all offers are made by the seller and the time between offers is small then the buyer invests efficiently and the seller extracts all of the surplus hence bargaining with frequently repeated offers remedies the hold up problem even when the agent who makes the relation specific investment has no bargaining power and contracting is not possible we consider alternative formulations with uncertain gains from trade or two sided investment

asymmetric information and the property rights approach to the theory of the firm abstract in the grossman hart mooreproperty rights approach to the theory of the firm it is usually assumed that information is symmetric ownership matters for investment incentives provided that investments are partly relationship specific we study the case of completely relationship specific investments i e the disagreement payoffs do not depend on the investments it turns out that if there is asymmetric information then ownership matters for investment incentives and for the expected total surplus specifically giving ownership to party b can be optimal even when only party a has to make an investment decision and even when the owner s expected disagreement payoff is larger under a ownership

investment and screening under asymmetric endogenous information this article provides an analysis of screening contracts in a complete but imperfect information environment as opposed to the usual incomplete information bayesian environment an agent faces a hold up situation while making a cost reducing specific investment that is not observed by the principal to prevent the hold up the agent randomizes his investment strategy and the principal offers a screening contract the informational rents provided by the equilibrium contract finance the investment for a large class of cost functions the randomization is such that the marginal surplus follows a power distribution

deposit rate ceilings and the market value of banks the case of france 1971 1981 the objective of this paper is to develop an empirical methodology to assess the relationship between the market value and the asset liability structure of banks a simple bank valuation model is suggested and empirically tested on a sample of french banks the paper attempts to evaluate the effect of corporate taxation the rent on deposits subject to interest rate ceilings and the determinants of the 1974 drop in banks market values copyright 1992 by ohio state university press

information and bargaining in the hold up problem this article incorporates an information structure with partial information into the canonical hold up problem the optimal information structure balances the tradeoff between ex ante efficiency the information rent effect and ex post efficiency the bargaining disagreement effect with one shot bargaining it occurs at an intermediate level of information asymmetry when there is repeated bargaining it is attained with perfect asymmetry asymmetric information the parameter that is frequently ignored in the literature turns out to be an important welfare instrument for the hold up problem our results therefore provide a basis for institutional design regarding the optimal control of information flow

the boundaries of the firm revisited why do firms exist what is their function and what determines their scope these remain the central questions in the economics of organization they are also central questions for business executives and corporate strategists the worldwide volume of corporate mergers and acquisitions exceeded 1 6 trillion in 1997 it is hard to imagine that so much time effort and investment bankers fees would be spent on adjusting firm boundaries unless there was some underlying economic gain indeed the exceptional levels of merger and acquisition activity over the past two decades are a strong indication that economically significant forces do determine organizational boundaries the study of firm boundaries originated with the famous essay by coase 1937 who raised the question of why we observe so much economic activity inside formal organizations if as economists commonly argue markets are such powerful and effective mechanisms for allocating scarce resources coase s answer was in terms of the costs of transacting in a world of imperfect information when the transaction costs of market exchange are high it may be less costly to coordinate production through a formal organization than through a market in large part thanks to the work of williamson 1975 1985 recent decades have seen a resurgence of interest in coase s fundamental insight that firm boundaries can be explained by efficiency considerations our understanding of firm boundaries has been sharpened by identifying more precisely the nature and sources of transaction costs in different circumstances in the process the focus of

is fairly priced deposit insurance possible we analyze risk sensitive incentive compatible deposit insurance in the presence of private information and moral hazard without deposit linked subsidies it is impossible to implement risk sensitive incentive compatible deposit insurance pricing in a competitive deregulated environment except when the deposit insurer is the least risk averse agent in the economy we establish this formally in the context of an insurance scheme in which privately informed depository institutions are offered deposit insurance premia contingent on reported capital the result holds for alternative sorting instruments as well this suggests a contradiction between deregulation and fairly priced risk sensitive deposit insurance this paper exposes a conflict between a deregulated competitive financial services industry on the one hand and fairly priced risk sensitive deposit insurance on the other we show that if depository institutions dis are perfectly competitive i e each makes zero profits on average then it is impossible to implement incentive compatible risk sensitive deposit insurance pricing recent distress among dis has fueled debate about reform of the existing deposit insurance system many believe that the prevailing risk insensitive premium structure encourages dis to choose excessively risky assets and that it should be replaced by deposit insurance premia linked to the dis choices of risk 2 risk sensitive deposit insurance pricing however imposes greater informational demands on the deposit insurer and runs afoul of both

exploring the nexus between banking sector reform and performance evidence from newly acceded eu countries abstract the aim of this study is to examine the relationship between banking sector reform and bank performance measured in terms of efficiency total factor productivity growth and net interest margin accounting for the effects through competition and bank risk taking to this end we develop an empirical model of bank performance which is consistently estimated using recent econometric techniques the model is applied to bank panel data from ten newly acceded eu countries the results indicate that both banking sector reform and competition exert a positive impact on bank efficiency while the effect of reform on total factor productivity growth is significant only toward the end of the reform process finally the effect of capital and credit risk on bank performance is in most cases negative while it seems that higher liquid assets reduce the efficiency and productivity of banks

the theory of the firm as governance structure from choice to contract the propositions that organization matters and that it is susceptible to analysis were long greeted by skepticism by economists one reason why this message took a long time to register is that it is much easier to say that organization matters than it is to show how and why the prevalence of the science of choice approach to economics has also been an obstacle as developed herein the lessons of organization theory for economics are both different and more consequential when examined through the lens of contract this paper examines economic organization from a science of contract perspective with special emphasis on the theory of the firm

government versus private ownership of public goods the role of bargaining frictions abstract the government and a non governmental organization ngo can invest in the provision of a public good who should be the owner of the public project in an incomplete contracting model in which ex post negotiations are without frictions the party that values the public good most should be the owner regardless of technological aspects however under the plausible assumption that there are bargaining frictions the optimal ownership structure depends on technological aspects and on the parties valuations we show that the differences between incomplete contracting models with public goods and private goods are thus smaller than has previously been thought

countervailing incentives in agency problems abstract we analyze countervailing incentives in agency problem countervailing incentives exist when the agent has an incentive to understate his private information for some of its realizations and to overstate it for others when countervailing incentives arise pooling generally characterizes the equilibrium contract furthermore performance is distorted both above and below efficient levels in addition the agent s rents generally increase with the realization of his private information over some ranges and decrease over other ranges we demonstate that the creation of countervailing incentives can enhance aggregate welfare

deposit rates credit rates and bank capital the klein monti model revisited abstract the paper expands the klein monti model with bankruptcy risk and deposit insurance the well known result of independence between deposit and credit rates is shown to be lost the causal relationship becomes recursive and the direction of the recursivity depends on the existence or the absence of a deposit insurance mechanism

competition policy in banking this paper summarizes some of the arguments relating competition and banking instability draws connections between regulation and competition policy and surveys and analyses the role of competition policy in the banking sector in a financial crisis it is argued that a trade off between competition and stability is bound to persist despite improvements in regulation that the banking sector specificity should be recognized by competition policy and that competition policy and regulation need close coordination copyright 2011 oxford university press

shareholder value creation in japanese banking this paper advances the study of fiordelisi and molyneux 2010 by examining the shareholder value efficiency and its determinants for a large sample of japanese banks between 1999 and 2011 a new specifically tailored measure of the economic value added approach based on the shadow price of equity is developed in order to account for specific characteristics of the japanese banking system this new shareholder value measure is then used in a dynamic panel data model as a linear function of various bank risk bank specific and macroeconomic variables this study finds that cost efficiency gains credit risk and bank size are the most important factors in explaining the shareholder value creation in japanese banking cost efficiency changes are also found to significantly influence cost of equity capital

banking deregulation in europe banking deregulation ernst baltensperger and jean dermine deregulation of financial services is well under way in many european countries this has led to fears that economies are now more vulnerable to macroeconomic shocks the authors focus on one aspect of financial deregulation namely liberalization of the banking system they show that measures such as the abolition of reserve requirements increase macroeconomic variability under some circumstances but reduce it under others no general macroeconomic case can be made for banking regulation or for its liberalization analysis of microeconomic issues is more fruitful asymmetric information and the risks of contagion in a panic can lead to runs against the banking system to the extent that these are socially inefficient public intervention may be justified this presumption is stronger since the risks of bank runs have grown recently with the increased maturity mismatch the finance of illiquid loans by liquid short term deposits to meet this danger the authors recommend regulation of deposit contracts whilst preserving incentives for bank monitoring by private parties specifically they propose an ex post liability of current and former depositors when banks default thereby offsetting the incentive to withdraw funds at the onset of a crisis being quick off the mark would no longer be sufficient and sophisticated depositors would press for greater disclosure and fuller monitoring of bank activities the authors also recommend that remaining controls on deposit interest rates should be scrapped and that supervision of international banking should be cooperatively conducted by host and parent authorities