Protecting Savings: Do We Need a Supervision Authority?
AbstractWe apply a three-tier hierarchical model of regulation, developed along the lines of Laffont and Tiroleâ€™s (1993), to an adverse selection problem in the corporate bond market. The bank brings the bonds to the market and informs the potential buyers about the bondsâ€™ risk; a unique benevolent public authority aims at maximising saversâ€™ welfare. The main goal is to investigate whether this unique authority is able to fully inform the market on firmsâ€™ true credit worthiness when banks, in order to recover doubtful credits, favour the placement of bonds issued by levered firms by concealing their true risk. We establish the necessary condition that allows the optimal sanctions to produce the first best equilibrium.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Rome La Sapienza, Department of Public Economics in its series Working Papers with number 84.
Date of creation: Jul 2005
Date of revision:
Corporate bond; Incentives; Collusion; Regulation.;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
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.:
- Kirstein, Roland, 2000.
"The New Basle Accord, Internal Ratings, and the Incentives of Banks,"
CSLE Discussion Paper Series
2000-06, Saarland University, CSLE - Center for the Study of Law and Economics.
- Kirstein, Roland, 2002. "The new Basle Accord, internal ratings, and the incentives of banks," International Review of Law and Economics, Elsevier, vol. 21(4), pages 393-412, May.
- Jean-Jacques Laffont & Jean Tirole, 1988.
"The Politics of Government Decision-Making: A Theory of Regulatory Capture,"
506, Massachusetts Institute of Technology (MIT), Department of Economics.
- Laffont, Jean-Jacques & Tirole, Jean, 1991. "The Politics of Government Decision-Making: A Theory of Regulatory Capture," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1089-127, November.
- Jean-Jacques LAFFONT & Jean TIROLE, 1990. "The Politics of Government Decision-Making : a Theory of Regulatory Capture," Cahiers de Recherches Economiques du DÃ©partement d'EconomÃ©trie et d'Economie politique (DEEP) 9004, Université de Lausanne, Faculté des HEC, DEEP.
- Joel S. Demski, 2003. "Corporate Conflicts of Interest," Journal of Economic Perspectives, American Economic Association, vol. 17(2), pages 51-72, Spring.
- Demsetz, Harold, 1969. "Information and Efficiency: Another Viewpoint," Journal of Law and Economics, University of Chicago Press, vol. 12(1), pages 1-22, April.
- Laffont, J.-J., 1999. "Political Economy, Information and Incentives," Papers 99.516, Toulouse - GREMAQ.
- Laffont, Jean-Jacques, 1999. "Political economy, information and incentives1," European Economic Review, Elsevier, vol. 43(4-6), pages 649-669, April.
- Andrei Shleifer & Robert W. Vishny, 1995.
"A Survey of Corporate Governance,"
Harvard Institute of Economic Research Working Papers
1741, Harvard - Institute of Economic Research.
- Bac, Mehmet, 2001.
" Corruption, Connections and Transparency: Does a Better Screen Imply a Better Scene?,"
Springer, vol. 107(1-2), pages 87-96, April.
- Mehmet Bac, 2001. "Corruption, Connections and Transparency: Does a Better Screen Imply a Better Scene?," Public Choice, Springer, vol. 107(1), pages 87-96, April.
- Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
- Patrick Bolton & Mathias Dewatripont, 2005.
MIT Press Books,
The MIT Press,
edition 1, volume 1, number 0262025760.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Luisa Giuriato).
If references are entirely missing, you can add them using this form.