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Reputation acquisition in imperfect financial markets

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  • Asano, Koji

Abstract

This paper incorporates financial market imperfections into the Diamond (1989) model where reputation concerns limit managers’ excessive risk-taking. We show that the reputational discipline collapses because of an increase in pledgeability and a decline in interest rates over time.

Suggested Citation

  • Asano, Koji, 2016. "Reputation acquisition in imperfect financial markets," Economics Letters, Elsevier, vol. 139(C), pages 76-78.
    • Handle: RePEc:eee:ecolet:v:139:y:2016:i:c:p:76-78
    DOI: 10.1016/j.econlet.2016.01.001
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    References listed on IDEAS

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    1. Holmström, Bengt, 2013. "Inside and Outside Liquidity," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262518536, December.
    2. Bengt Holmstrom & Jean Tirole, 1997. "Financial Intermediation, Loanable Funds, and The Real Sector," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(3), pages 663-691.
    3. Veronica Guerrieri & Peter Kondor, 2012. "Fund Managers, Career Concerns, and Asset Price Volatility," American Economic Review, American Economic Association, vol. 102(5), pages 1986-2017, August.
    4. Diamond, Douglas W, 1989. "Reputation Acquisition in Debt Markets," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 828-862, August.
    5. Raghuram G. Rajan, 2006. "Has Finance Made the World Riskier?," European Financial Management, European Financial Management Association, vol. 12(4), pages 499-533, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Reputation; Risk-taking; Pledgeability; Low interest rates;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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