Moral Hazard under Commercial and Universal Banking
AbstractMany claims have been made about the potential benefits, and the potential costs, of adopting a system of universal banking in the United States. The authors evaluate these claims using a model where there is a moral hazard problem between banks and 'borrowers,' a moral hazard problem between banks and a deposit insurer, and a costly state verification problem. Under conditions the authors describe, allowing banks to take equity positions in firms strengthens their ability to extract surplus, and exacerbates problems of moral hazard. The incentives of universal banks to take equity positions will often be strongest when these problems are most severe.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoArticle provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.
Volume (Year): 30 (1998)
Issue (Month): 3 (August)
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
Other versions of this item:
- John H. Boyd & Chun Chang & Bruce D. Smith, 1998. "Moral hazard under commercial and universal banking," Proceedings, Federal Reserve Bank of Cleveland, issue Aug, pages 426-471.
- John H. Boyd & Chun Chang & Bruce D. Smith, 1998. "Moral hazard under commercial and universal banking," Working Papers 585, Federal Reserve Bank of Minneapolis.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- John, Kose & John, Teresa A. & Saunders, Anthony, 1994. "Universal banking and firm risk-taking," Journal of Banking & Finance, Elsevier, vol. 18(2), pages 307-323, January.
- Allen, Franklin & Gale, Douglas, 1995.
"A welfare comparison of intermediaries and financial markets in Germany and the US,"
European Economic Review,
Elsevier, vol. 39(2), pages 179-209, February.
- Franklin Allen & Douglas Gale, 1994. "A welfare comparison of intermediaries and financial markets in Germany and the U.S," Working Papers 95-3, Federal Reserve Bank of Philadelphia.
- Santos, Joao A. C., 1999.
"Bank capital and equity investment regulations,"
Journal of Banking & Finance,
Elsevier, vol. 23(7), pages 1095-1120, July.
- Gale, Douglas & Hellwig, Martin, 1985. "Incentive-Compatible Debt Contracts: The One-Period Problem," Review of Economic Studies, Wiley Blackwell, vol. 52(4), pages 647-63, October.
- Berlin, Mitchell & John, Kose & Saunders, Anthony, 1996.
"Bank Equity Stakes in Borrowing Firms and Financial Distress,"
Review of Financial Studies,
Society for Financial Studies, vol. 9(3), pages 889-919.
- Mitchell Berlin & Kose John & Anthony Saunders, 1995. "Bank equity stakes in borrowing firms and financial distress," Working Papers 96-1, Federal Reserve Bank of Philadelphia.
- Gorton, Gary & Schmid, Frank A., 2000.
"Universal banking and the performance of German firms,"
Journal of Financial Economics,
Elsevier, vol. 58(1-2), pages 29-80.
- Gary Gorton & Frank A. Schmid, 1996. "Universal Banking and the Performance of German Firms," NBER Working Papers 5453, National Bureau of Economic Research, Inc.
- Boot, Arnoud W A & Thakor, Anjan, 1995.
"Financial System Architecture,"
CEPR Discussion Papers
1197, C.E.P.R. Discussion Papers.
- Merton, Robert C., 1977. "An analytic derivation of the cost of deposit insurance and loan guarantees An application of modern option pricing theory," Journal of Banking & Finance, Elsevier, vol. 1(1), pages 3-11, June.
- Gertler, M.L. & Hubbard, R.G., 1988.
"Financial Factors In Business Fluctuations,"
fb-_88-37, Columbia - Graduate School of Business.
- Mark Gertler & R. Glenn Hubbard, 1988. "Financial factors in business fluctuations," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 33-78.
- Mathias Dewatripont & Jean Tirole, 1994. "The prudential regulation of banks," ULB Institutional Repository 2013/9539, ULB -- Universite Libre de Bruxelles.
- Townsend, Robert M., 1979.
"Optimal contracts and competitive markets with costly state verification,"
Journal of Economic Theory,
Elsevier, vol. 21(2), pages 265-293, October.
- Robert Townsend, 1979. "Optimal contracts and competitive markets with costly state verification," Staff Report 45, Federal Reserve Bank of Minneapolis.
- Kareken, John H & Wallace, Neil, 1978. "Deposit Insurance and Bank Regulation: A Partial-Equilibrium Exposition," The Journal of Business, University of Chicago Press, vol. 51(3), pages 413-38, July.
- Randall J. Pozdena, 1991. "Why banks need commerce powers," Economic Review, Federal Reserve Bank of San Francisco, issue Sum, pages 18-31.
- Saunders, Anthony, 1994. "Banking and commerce: An overview of the public policy issues," Journal of Banking & Finance, Elsevier, vol. 18(2), pages 231-254, January.
- George A. Akerlof & Paul M. Romer, 1993. "Looting: The Economic Underworld of Bankruptcy for Profit," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2), pages 1-74.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.