Security by Design
Citations
76 citations
Cites background from "Security by Design"
...also induces shareholders to monitor bank management (Boot and Thakor 1993). Allen, Carletti, and Marquez (2011) directly predict that firms for which monitoring adds value should prefer to borrow from well capitalized banks....
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...also induces shareholders to monitor bank management (Boot and Thakor 1993). Allen, Carletti, and Marquez (2011) directly predict that firms for which monitoring adds value should prefer to borrow from well capitalized banks. Small and informationally opaque firms benefit from the certification provided by diligent screening and monitoring, so based on theories of capital-induced monitoring, they prefer well capitalized banks. I refer to this as the equity monitoring hypothesis. Boot, Greenbaum, and Thakor (1993) study when it is optimal for banks to renege on loan commitments, showing that financially strong banks are more likely to honor loan commitments. Bank-dependent firms value the bank’s ability to honor its loan commitments because it is costly for them to substitute to other sources of capital. Ivashina and Scharfstein (2010) find that this is an empirically relevant concern, as borrowers of Lehman Brothers drew down their credit lines to ensure they had access to those funds....
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...also induces shareholders to monitor bank management (Boot and Thakor 1993). Allen, Carletti, and Marquez (2011) directly predict that firms for which monitoring adds value should prefer to borrow from well capitalized banks. Small and informationally opaque firms benefit from the certification provided by diligent screening and monitoring, so based on theories of capital-induced monitoring, they prefer well capitalized banks. I refer to this as the equity monitoring hypothesis. Boot, Greenbaum, and Thakor (1993) study when it is optimal for banks to renege on loan commitments, showing that financially strong banks are more likely to honor loan commitments. Bank-dependent firms value the bank’s ability to honor its loan commitments because it is costly for them to substitute to other sources of capital. Ivashina and Scharfstein (2010) find that this is an empirically relevant concern, as borrowers of Lehman Brothers drew down their credit lines to ensure they had access to those funds. The financial commitment hypothesis predicts that bank-dependent firms borrow from well capitalized banks. Another line of work focuses on the bank’s risk management problem. Gornall and Strebulaev (2014) model the joint capital structure decision of the bank and its borrowers....
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...also induces shareholders to monitor bank management (Boot and Thakor 1993). Allen, Carletti, and Marquez (2011) directly predict that firms for which monitoring adds value should prefer to borrow from well capitalized banks. Small and informationally opaque firms benefit from the certification provided by diligent screening and monitoring, so based on theories of capital-induced monitoring, they prefer well capitalized banks. I refer to this as the equity monitoring hypothesis. Boot, Greenbaum, and Thakor (1993) study when it is optimal for banks to renege on loan commitments, showing that financially strong banks are more likely to honor loan commitments....
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59 citations
Cites background from "Security by Design"
...3See Gorton and Pennacchi (1990), Boot and Thakor (1993), Riddiough (1997), DeMarzo and Duffie (1999), DeMarzo (2005), Hartman-Glaser, Piskorski, and Tchistyi (2011), and Chemla and Hennessy (2014) for a rigorous theoretical treatment of this issue. of the first descriptive statistics on important…...
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41 citations
Cites background from "Security by Design"
...Boot and Thakor (1993) consider a noisy rational expectations model in which firms find it optimal to split their cash flows into safe (debt) and risky (equity) components....
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37 citations
35 citations
References
76 citations
59 citations
41 citations
37 citations
35 citations