A paradigm is presented in which both the extent of financial intermediation and the rate of economic growth are endogenously determined. Financial intermediation promotes growth because it allows a higher rate of return to be earned on capital, and growth in turn provides the means to implement

We study an incentive model of ®nancial intermediation in which ®rms as well as intermediaries are capital constrained. We analyze how the distribution of wealth across ®rms, intermediaries, and uninformed investors affects investment, interest rates, and the intensity of monitoring. We show

This paper analyzes the survival of organizations in which decision agents do not bear a major share of the wealth effects of their decisions. This is what the literature on large corporations calls separation of “ownership” and “control.” Such separation of decision and risk bearing

overallocate to stocks by a sizeable amount. ONE OF THE MORE STRIKING EMPIRICAL FINDINGS in recent financial research is the evidence of predictability in asset returns. 1 In this paper we examine the implications of this predictability for an investor seeking to make sensible portfolio allocation decisions

T he financial market turmoil in 2007 and 2008 has led to the most severefinancial crisis since the Great Depression and threatens to have largerepercussions on the real economy. The bursting of the housing bubble forced banks to write down several hundred billion dollars in bad loans caused

We examine the link between increases in housing wealth, financial wealth, and consumer spending. We rely upon a panel of 14 countries observed annually for various periods during the past 25 years and a panel of U.S. states observed quarterly during the 1980s and 1990s. We impute the aggregate

Companies are increasingly asked to provide innovative solutions to deep-seated problems of human misery, even as economic theory instructs managers to focus on maximizing their shareholders ' wealth. In this paper, we assess how organization theory and empirical research have thus far

little and will face financial insecurity in old age. The new 2004 wave of the Health and Retirement Study is invaluable for this first analysis of the financial situation of leading-edge Boomers, as it reports not only wealth levels but also information about respondents ’ planning behaviors

We propose a multiperiod model in which competitive arbitrageurs exploit discrepancies between the prices of two identical risky assets traded in segmented markets. Arbitrageurs need to collateralize separately their positions in each asset, and this implies a financial constraint limiting

. The paper studies the problem of maximizing the expected utility of terminal wealth in the framework of a general incomplete semimartingale model of a financial market. We show that the necessary and sufficient condition on a utility function for the validity of several key assertions