In some countries it is very difficult for shareholders to fire managers when they do a poor job. What type of financing would you expect to find in those countries?
Answer to relevant QuestionsOne of the solutions to the adverse selection problem associated with asymmetric information is the pledging of collateral. However, the collateral may be riskier than initially thought. As an example, explain why the ...The rise of securities markets and the expansion of intermediation by nonbanks has come partly at the expense of commercial banks. Plot the ratio of bank credit (FRED code: TOTLL) to total credit market debt outstanding ...Explain how a bank uses liability management to respond to a deposit outflow. Why do banks prefer liability management to asset management?Suppose you are advising a bank on the management of its balance sheet. In light of the financial crisis of 2007-2009, what arguments might you make to convince the bank to hold additional capital?What share of U.S. banks fail? Plot since 2000 the fraction (in percent) of bank failures (FRED code: BKFTTLA641N) relative to the number of banks (FRED code: USNUM). Comment on the timing and the proportion of failures. ...
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