Financial Institutions Center

Working Papers

2018 & 2017 Working Papers


The Evolving Complexity of Capital Regulation
Richard J. Herring- January 2018


Stress Testing in Wartime and in Peacetime
Til Schuermann – March 2016

Pricing and hedging GDP-linked bonds in incomplete markets
Consiglio, A. and S.A. Zenios

Is Bigger Necessarily Better in Community Banking?
Joseph P. Hughes, Julapa Jagtiani and Loretta J. Mester – January 2017

International Coordination of Financial Supervision: Why Has It Grown? Will It Be Sustained?
Richard J. Herring- May 2017

2016 Working Papers

Stress Testing in Wartime and in Peacetime
Til Schuermann – March 2016

Small Business Lending: Challenges and Opportunities for Community Banks
Julapa Jagtiani and Catharine Lemieux – March 2016

Equivalence of robust VaR and CVaR optimization
Somayyeh Lotfi and Stavros A. Zenios – April 2016

Gone with the wind: demographic transition and domestic saving
Eduardo Cavallo, Gabriel Sánchez, Patricio Valenzuela – April 2016

Pricing sovereign contingent convertible debt
Andrea Consiglio, Michele Tumminello & Stavros A. Zenios – July 2016

Portfolio diversi cation in the sovereign credit swap markets
Andrea Consiglio, Somayyeh Lotfi & Stavros A. Zenios – July 2016

How to Reform the Credit-Rating Process to Support a Revival of Private-Label Securitization
Richard J. Herring, Edward J. Kane

Less Really Can be More: Why Simplicity & Comparability Should be Regulatory Objectives
Richard J. Herring

The Corporate Complexity of Global Systemically Important Banks
Jacopo Carmassi & Richard J. Herring

2015 Working Papers

Model Risk and the Great Financial Crisis: The Rise of Modern Model Risk Management
Jeffrey A. Brown, Brad McGourty and Til Schuermann – January 2015

Capital Controls and the Cost of Debt
Eugenia Andreasen, Martin Schindler, Patricio Valenzuela – January 2015

Designing guarantee options in defi ned contributions pension plans
Andrea Consiglio, Michele Tumminello & Stavros A. Zenios – February 2015

Depositor discipline during good and bad times: The role of the guarantor of last resort
Krzysztof Jackowicz, Oskar Kowalewski and Łukasz Kozłowski – February 2015

The Institutions of Federal Reserve Independence
Peter Conti-Brown – April 2015

Financial Openness, Domestic Financial Development and Credit Ratings
Eugenia Andreasen, Patricio Valenzuela – June 2015

2014 Working Papers

A Probability-Based Stress Test of Federal Reserve Assets and Income
Jens H. E. Christensen, Jose A. Lopez and Glenn D. Rudebusch, December 2013

Bank Capital for Operational Risk: A Tale of Fragility and Instability
Mark Ames, Til Schuermann and Hal S. Scott, February 10, 2014
An updated version of this paper dated February 2015 is available here.

Why Do Banks Practice Regulatory Arbitrage? Evidence from Usage of Trust Preferred Securities
Nicole M. Boyson, Rüdiger Fahlenbrach and René M. Stulz, March 2014

Fairness and Reflexivity in the Cyprus Bail-in
Stavros A. Zenios, March 2014

Interest Rate Risk and Bank Equity Valuations
William B. English, Skander J. Van den Heuvel and Egon Zakrajsek, April 2014

The Federal Reserve’s Discount Window and TAF Programs: “Pushing on a String?”
Allen N. Berger, Lamont K. Black, Christa H.S. Bouwman and Jennifer Dlugosz, April 2014

Bank Risk Taking and Liquidity Creation Following Regulatory Interventions and Capital Support
Allen N. Berger, Christa H.S. Bouwman, Thomas Kick and Klaus Schaeck, April 2014

Deposits and Bank Capital Structure
Franklin Allen, Elena Carletti and Robert Marquez, May 2014
This is an updated version of Working Paper #13-13

Governance, Risk Management, and Risk-Taking in Banks
René M. Stulz, June 2014

Risk management optimization for sovereign debt restructuring
Andrea Consiglio, Stavros A. Zenios, August 2014 UPDATED MARCH 2015

Self-reporting under SEC Reg AB and Transparency in Securitization: Evidence from loan-level disclosure of risk factors in RMBS deals
Joseph R. Mason, Michael B. Imerman and Hong Lee, June 2014

Bank Ownership Structure, SME Lending and Local Credit Markets
Iftekhar Hasan, Krzysztof Jackowicz, Oskar Kowalewski and Łukasz Kozłowski, August 2014

Credit Access After Consumer Bankruptcy Filing: New Evidence
Julapa Jagtiani and Wenli Li, August 2014

Risk profiles for re-profiling the sovereign debt of crisis countries
Andrea Consiglio, Stavros A. Zenios, August 2014

Issuing bonds, shares or staying private? Determinants of going public in an emerging economy
Krzysztof Jackowicz, Oskar Kowalewski, Łukasz Kozłowski and Paulina Roszkowska, September 2014

Banks and the World’s Major Banking Centers, 2010
Sang Rim Choi, Daekeun Park and Adrian E. Tschoegl, October 2014

The Evolution of U.S. Community Banks and Its Impact on Small Business Lending
Julapa Jagtiani, Ian Kotliar and Raman Quinn Maingi, October 2014

Interim Fund Performance and Fundraising in Private Equity
Brad M. Barber, Ayako Yasuda, October 2014

Law and structure of the capital markets
Xian Gu and Oskar Kowalewski

FED Liquidity Policy during the Financial Crisis: Playing For Time
Robert Eisenbeis and Richard Herring

2013 Working Papers

Did Capital Requirements and Fair Value Accounting Spark Fire Sales in Distressed Mortgage-Backed Securities?
Craig B. Merrill, Taylor D. Nadauld, René M. Stulz and Shane Sherlund

Examining the Impact of the Volcker Rule on Markets, Businesses, Investors, and Job Creation, Part II
James R. Barth, December 2012

Financing Through Asset Sales
Alex Edmans and William Mann, December 2012

Bank Regulation and Supervision in 180 Countries from 1999 to 2011
James R. Barth, Gerard Caprio, Jr., Ross Levine, January 2013

China’s Housing Market: Is a Bubble About to Burst?
James R. Barth, Michael Lea and Tong Li, October 2012

Why Did Financial Institutions Sell RMBS at Fire Sale Prices during the Financial Crisis?
Craig B. Merrill, Taylor D. Nadauld, René M. Stulz, and Shane M. Sherlund, February 2012

What Determines State Capture in Poland?
Stanisław Alwasiak, Monika Lewandowska-Kalina, Lech Kalina, Oskar Kowalewski, Michał Mozdzen and Krzysztof Rybinski

Moral Hazard in Mutural Fund Management: The Quality-Assuring Role of Fees
Michel A. Habib and D. Bruce Johnsen, March 2013

The Cyprus Debt: Perfect Crisis and a Way Forward
Stavros A. Zenios, March 2013
This is the pre-publication verson only. The published version is available at Cyprus Economic Policy Review, Vol. 7 , No. 1 , pp. 3 – 45 (2013).

Rollover Risk and Corporate Bond Spreads
Patricio Valenzeula

Sovereign Ceilings “Lite”? The Impact of Sovereign Ratings on Corporate Ratings
Eduardo Borensztein, Kevin Cowan and Patricio Valenzuela

Sources of Inconsistencies in Risk Weighted Asset Determinations
Michel Araten, May 2012

Deposits and Bank Capital Structure
Franklin Allen and Elena Carletti, March 2013
An updated version of this paper appears are Working Paper #14-08

Shared Auditors in Mergers and Acquisitions
Dan S. Dhaliwal, Phillip T. Lamoreaux. Lubomir P. Litov and Jordan B. Neyland, April 2013

Lawyers and Fools: Lawyer-Directors in Public Corporations
Lubomir P. Litov, Simone M. Sepe, and Charles K. Whitehead
forthcoming, The Georgetown Law Journal, vol. 102

Large Capital Infusions, Investor Reactions, and the Return and Risk-Performance of Financial Institutions over the Business Cycle
Elyas Elyasiani, Loretta J. Mester and Michael S. Pagano, May 2013
This paper is an updated version of #11-51

Who Said Large Banks Don’t Experience Scale Economies? Evidence from a Risk-Return-Driven Cost Function
Joseph P. Hughes and Loretta J. Mester, April 2013
This paper is an updated version of #11-47

Seeking Alpha, Taking Risk: Evidence from Non-Executive Pay in U.S. Bank Holding Companies
Viral Acharya, Lubomir V. Litov and Simone M. Sepe, October 2013

The Use of Escrow Contracts in Acquisition Agreements
Sanjai Bhagat, Sandy Klasa and Lubomir V. Litov, January 2014

Why High Leverage is Optimal for Banks
Harry DeAngelo and René M. Stulz, May 2013

Capital Structure and Investment Dynamics with Fire Sales
Douglas Gale and Piero Gottardi, April 2013

Estimating Ambiguity Aversion in a Portfolio Choice Experiment
David Ahn, Syngjoo Choi, Douglas Gale, and Shachar Kariv, June 2013

BHC Derivatives Usage, Cost of Debt and Lending Patterns
Saiying (Esther) Deng, Elyas Elyasiani and Connie X. Mao, January 2013

Bank Holding Company Performance, Risk and “Busy” Board of Directors
Elyas Elyasiani and Ling Zhang

The Effects of Foreign and Government Ownership on Bank Lending Behavior During a Drisis in Central and Eastern Europe
Franklin Allen, Krzysztof Jackowicz and Oskar Kowalewski

Financial Openness, Market Structure and Private Credit: An Empirical Investigation
Ronald Fischer and Patricio Valenzuela

Does Legal Counsel Expertise Add Value? Evidence from Mergers and Acquisitions
Sandy Klasa, Lubomir P. Litov, Jordan Neyland and Simone M. Sepe, July 2013

Measuring the Performance of Banks: Theory, Practice, Evidence, and Some Policy Implications
Joseph P. Hughes and Loretta J. Mester, August 1, 2013

The African Financial Development and Financial Inclusion Gaps
Franklin Allen, Elena Carletti, Robert Cull, Jun “QJ” Qian, Lemma Senbet and Patricio Valenzuela, September 2013

Stress Testing Bank Profitability
Michael Duane, Til Schuermann and Peter Reynolds, September 2013

Innovation in Times of Financial Crises
Nina Gorovaia and Stavros A. Zenios, November 13, 2013

Liquidity: How Banks Create It and How It Should Be Regulated
Christa H.S. Bouwman, October 2013
This is the pre-publication version only. The published article is forthcoming in The Oxford Handbook of Banking, (2nd edition; A.N. Berger, P. Molyneux, and J.O.S. Wilson (eds.))

Stakeholder Governance, Competition and Firm Value
Franklin Allen, Elena Carletti and Robert Marquez, August 2, 2013

The European Securities and Markets Authority: Accountability towards EU Institutions and Stakeholders
Carmine Di Noia and Matteo Gargantini

Generating Multi-factor Arbitrage-free Scenario Trees with Global Optimization
Andrea Consiglio, Angelo Carollo and Stavros A. Zenios, January 2014

Staggered Boards And Firm Value, Revisited
K. J. Martijn Cremers, Lubomir P. Litov and Simone M. Sepe, December 5, 2013

Politically Connected Firms in Poland and their Access to Bank Financing
Iftekhar Hasan, Krzysztof Jackowicz, Oskar Kowalewski and Łukasz Kozłowski

The Case for Rapid Resolution Plans
Richard J. Herring

2012 Working Papers

Financing Firms in India
Franklin Allen, Rajesh Chakrabarti, Sankar De, Jun Qian and Meijun Qian, December 2011
An older version of this paper appears as #06-08
This is the pre-publicaton version only. The final version has been published in the Journal of Financial Interemediation Volume 21, 409-445.

Government Interventions – Restoring or Destructing Financial Stability in the Long-Run?
Aneta Hryckiewicz, January 2012

The IPO of Industrial and Commercial Bank of China and the ‘Chinese Model’ of Privatizing Large Financial Institutions
Franklin Allen, Jun “QJ” Qian, Susan Chenyu Shan and Mengxin Zhao, January 2012
This is an updated version of #11-63

Target-Date Funds in 401(k) Retirement Plans
Olivia S. Mitchell and Stephen P. Utkus, March 2012

Financial Intermediation, Markets, and Alternative Financial Sectors
Franklin Allen, Elena Carletti, Jun “QJ” Qian and Patricio Valenzuela, March 2012

Just How Big Is the Too Big to Fail Problem?
James R. Barth, Apanard (Penny) Prabha and Phillip Swagel, March 2012

Resolving the African Financial Development Gap: Cross-Country Comparisons and a Within-Country Study of Kenya
Franklin Allen, Elena Carletti, Robert Cull, Jun Qian, Lemma Senbet and Patricio Valenzuela, April 2012
Forthcoming in NBER Volume on African Economic Successes, edited by S. Edwards, S. Johnson and D. Weil

Stress Testing Banks
Til Schuermann, February 2013

A Markov-Switching Multi-Fractal Inter-Trade Duration Model, with Application to U.S. Equities
Fei Chen, Francis X. Diebold and Frank Schorfheide, May 2012

Stability and Growth Pact and Fiscal Discipline in the Eurozone
Victor Ngai, May 2012

Improving Access to Banking: Evidence from Kenya
Franklin Allen, Elena Carletti, Robert Cull, Jun “QJ” Qian, Lemma Senbet and Patricio Valenzuela, July 2012

Market Discipline during Crisis: Evidence from Bank Depositors in Transition Countries
Iftekhar Hasan, Krzysztof Jackowicz, Oskar Kowalewski and Łukasz Kozłowski, July 2012

In What Form Will the Eurozone Emerge from the Crisis?
Franklin Allen and Victor Ngai, August 2012

Does Corporate Governance Determine Corporate Performance and Dividends During Financial Crisis: Evidence from Poland
Oskar Kowalewski, September 2012

Scenario Analysis in the Measurement of Operational Risk Capital: A Change of Measure Approach
Kabir K. Dutta and David F. Babbel, July 2012
An earlier version of this paper appears as Working Paper #10-10. This paper is forthcoming in the Journal of Risk and Insurance.

Breaking (Banks) Up is Hard to Do: New Perspective on Too Big To Fail
James R. Barth and Apanard (Penny) Prabha, December 2012

The Case for Bail-ins
Thomas F. Huertas

Default and the International Role of the Dollar
Richard J. Herring

2011 Working Papers

Stable Value Funds: Performance to Date
David F. Babbel and Miguel A. Herce, January 2011

The Impact of Electoral Factors on Commercial Banks in CEE Countries
Krzysztof Jackowicz, Oskar Kowalewski, and Łukasz Kozłowski, January 2011

Did Doubling Reserve Requirements Cause the Recession of 1937-1938? A Microeconomic Approach
Charles W. Calomiris, Joseph R. Mason and David C. Wheelock, January 2011

House Price Index Methodology
Chaitra H. Nagaraja, Lawrence D. Brown and Susan M. Wachter, June 2010

Monetary Policy, Leverage, and Bank Risk-Taking
Giovanni Dell’Ariccia, Luc Laeven and Robert Marquez, December 2010

Venture Capital and Other Private Equity: A Survey
Andrew Metrick and Ayako Yasuda, December 2010

Systemic Risk and the U.S. Insurance Sector
J. David Cummins and Mary A. Weiss, September 2010

Efficiency, Productivity, and Scale Economies in the U.S. Property-Liability Insurance Industry
J. David Cummins and Xiaoying Xie, December 2010

Bankruptcy, Finance Constraints and the Value of the Firm
Douglas Gale and Piero Gottardi

Commentary: Capital Regulation and Risk Sharing
Douglas Gale, July 2010

Rollover Risk and Market Freezes
Viral Acharya, Douglas Gale and Tanju Yorulmazer, October 2010

Liquidity and Monetary Policy
Douglas Gale, October 2010

Style Migration and the Cross-Section of Stock Returns
Hsiu-Lang Chen and Russ Wermers, December 2010

Mutual Fund Return Predictability in Partially Segmented Markets
Ayelen Banegas, Ben Gillen, Allan Timmermann and Russ Wermers, January 2011

The Investment Value of Mutual Fund Portfolio Disclosure
Russ Wermers, Tong Yao and Jane Zhao, December 2010

Macro-Prudential Regulation and the New Road to Financial Stability: Looking Through Darwin’s Glasses
Charles Taylor, September 2010

Option Anomalies and the Pricing Kernel
Peter Christoffersen, Steven Heston and Kris Jacobs, June 2010

Market Skewness Risk and the Cross-Section of Stock Returns
Bo Young Chang, Peter Christoffersen and Kris Jacobs, July 2010

Time-Varying Jump Intensities and Fat Tail Dynamics: Evidence from S&P500 Returns and Options
Peter Christoffersen, Kris Jacobs and Chayawat Ornthanalai, May 2010

Is the Potential for International Diversfication Disappearing?
Peter Christoffersen, Vihang Errunza, Kris Jacobs and Xisong Jin, November 2010

Bank Liquidity Creation, Monetary Policy, and Financial Crises
Allen N. Berger and Christa H.S. Bouwman, October 2011

How Does Capital Affect Bank Performance During Financial Crises?
Allen N. Berger and Christa H.S. Bouwman, March 2011

Corporate Governance Propagation through Overlapping Directors
Christa H.S. Bouwman, December 2010

Does Sign Matter More than Size? An Investigation into the Source of Investor Overconfidence
Sankar De, Naveen. R. Gondhi and Bhimasankaram Pochiraju, November 2010

Do Depositors Discipline Banks? An International Perspective
Allen N. Berger and Rima Turk-Ariss, November 2010

Social Networks and Career Outcomes
Allen N. Berger, Thomas Kick, Michael Koetter and Klaus Schaeck

The Changing Role of Central Banks
C.A.E. Goodhart

Money, Financial Stability and Efficiency
Franklin Allen, Elena Carletti and Douglas Gale, January 2011
Published as “Money, Financial Stability, and Efficiency,” Journal of Economic Theory 149, 2014, 100-127.

What Should Central Banks do about Real Estate Prices?
Franklin Allen and Elena Carletti, January 2011

Entrepreneurial Spawning and Firm Characteristics
Michel A. Habib, Ulrich Hege and Pierre Mella-Barral, January 2011

Insuring Non-Verifiable Losses and the Role of Intermediaries
Neil A. Doherty, Christian Laux, and Alexander Muermann, October 2010

Why Are There Global Imbalances? The Case of South Korea
Franklin Allen and JooYun Hong, February 2011
This is the pre-publication version only. For the published version please see Korean Social Science Research Council 38(2), 2011, 1-33.

Liquidity Hoarding
Douglas Gale and Tanju Yorulmazer, March 2011

Forecasting and Stress Testing Credit Card Default Using Dynamic Models
Tony Bellotti and Jonathan Crook

Corporate Governance and Intra-group Transactions in European Bank Holding Companies During the Crisis
Franklin Allen, Xian Gu and Oskar Kowalewski, February 2011

How Does Capital Affect Bank Performance During Financial Crises?
Allen N. Berger and Christa H.S. Bouwman, March 2011

Financial Crisis, Structure and Reform
Franklin Allen, Xian Gu and Oskar Kowalewski, April 2011
This is the pre-publication version only. For the published version please see Journal of Banking & Finance 36 (2012) 2960–2973.

The Hidden Transformation. Changing Role of the State after the Collapse of Communism in Central and Eastern Europe
Oskar Kowalewski and Krzysztof Rybinski, February 2011

Asset Prices, Financial Stability and Monetary Policy
Franklin Allen and Kenneth Rogoff, February 2011

New Theories to Underpin Financial Reform
Franklin Allen and Elena Carletti, February 2011
This paper has been published in the Journal of Financial Stability (9) 2013, 242-249.

Why and How to Design a Contingent Convertible Debt Requirement
Charles W. Calomiris and Richard J. Herring, November 2011

Survival of the Reckless: Feedback, Foresight and the Evolutionary Roots of the Financial Crisis
Michael G. Jacobides and Sidney G. Winter, July 2010

Optimal Portfolio Choice over the Life-Cycle with Flexible Work, Endogenous Retirement, and Lifetime Payouts
Jingjing Chai, Wolfram Horneff, Raimond Maurer, and Olivia S. Mitchell, May 2011
This is the prepublication version only. For the published version, please see Review of Finance, July 2011, 15(3).

The Behavior of Savings and Asset Prices When Preferences and Beliefs are Heterogeneous
Ngoc-Khanh Tran and Richard Zeckhauser, June 2011

Core Measures of Inflation as Predictors of Total Inflation
Theodore M. Crone, N. Neil K. Khettry, Loretta J. Mester and Jason A. Novak, June 2011

Internal Governance Mechanisms and Pension Fund Performance
Krzysztof Jackowicz and Oskar Kowalewski, July 2011

Who Said Large Banks Don’t Experience Scale Economies? Evidence from a Risk-Return Driven Cost Function
Joseph P. Hughes and Loretta J. Mester, July 2011
An updated version of this paper appears as #13-17

Systemic Risk Channel and TARP: Banking Relationship Spillover in the Credit Default Swap Market
Wei-Ling Song and Cihan Uzmanoglu, August 2011

A Markov Test for Alpha
Dean P. Foster, Robert Stine, and H. Peyton Young, September 2011

A Strategy-Proof Test of Portfolio Returns
Dean P. Foster and H. Peyton Young, July 2011

Large Capital Infusions, Investor Reactions, and the Return and Risk Performance of Financial Institutions over the Business Cycle and Recent Financial Crisis
Elyas Elyasiani, Loretta J. Mester and Michael S. Pagano, September 2011
An updated version of this paper appears as #13-16

Financial Reversal in Rural China
Meijun Qian and Yasheng Huang, 2011

Political Promotion, CEO Incentives, and the Relationship between Pay and Performance
Jerry Cao, Michael Lemmon, Xiaofei Pan, Meijun Qian and Gary Tian, 2011

China’s Financial System: Opportunities and Challenges
Franklin Allen, Jun “QJ” Qian, Chenying Zhang and Mengxin Zhao, October 2011

Is Your Money Safe? What Italians Know About Deposit Insurance
Laura Bartiloro, October 2011

Identifying the Right Mix of Capital and Cash Requirements in Prudential Bank Regulation
Charles Calomiris, October 2011
forthcoming in Strengthening the Liquidity of the Financial System, edited by Richard Herring, FIC Press, Wharton Financial Institutions Center, 2011

Bank Risk Taking and Liquidity Creation following Regulatory Interventions and Capital Support
Allen N. Berger, Christa H.S. Bouwman, Thomas Kick and Klaus Schaeck, October 2011

Asset Commonality, Debt Maturity and Systemic Risk
Franklin Allen, Ana Babus and Elena Carletti, November 2011
forthcoming in The Journal of Financial Economics
This is an updated version of #10-30
Published as “Asset Commonality, Debt Maturity and Systemic Risk” (with A. Babus and E. Carletti), Journal of Financial Economics, 2012, 104, 519-534.

The Value of Investment Banking Relationships: Evidence from the Collapse of Lehman Brothers
Chitru S. Fernando, Anthony D. May and William L. Megginson

The Effect of Liquidity on Governance
Alex Edmans, Vivian W. Fang and Emanuel Zur, November 2011

Are All Ratings Created Equal? The Impact of Issuer Size on the Pricing of Mortgage-Backed Securities
Jie (Jack) He, Jun ‘QJ’ Qian and Philip E. Strahan, October 2011

The Impact of Incentives and Communication Costs on Information Production: Evidence from Bank Lending
Jun ‘QJ’ Qian, Philip E. Strahan and Zhishu Yang, September 2011

The IPO of Industrial and Commercial Bank of China and the ‘Chinese Model’ of Privatizing Large Financial Institutions
Franklin Allen, Jun ‘QJ’ Qian, Susan Chenyu Shan and Mengxin Zhao, October 2011
An updated version of this paper appears as #12-03

An Alternative View on Law, Institutions, Finance and Growth
Franklin Allen, Jun ‘QJ’ Qian and Chenying Zhang, June 2011

Contracting With Synergies
Alex Edmans, Itay Goldstein and John Zhu, November 2011

Trends in Financial Innovation and Their Welfare Impact: An Overview
Franklin Allen, November 2011
This is the prepublication version only. The published version may be found in European Financial Management, 18(4), September 201, pp. 493-514.

Feedback Effects and the Limits to Arbitrage
Alex Edmans, Itay Goldstein and Wei Jiang, November 2011

The Initial Public Offering of the Industrial and Commercial Bank of China (ICBC)
Franklin Allen, Darien Huang, Jun “QJ” Qian and Mengxin Zhao, November 2011
forthcoming, M. Aoki, ed., The Frontier State of Economics: IEA XVI World Congress , “The Chinese Economy”

Incentives to Improve the Corporate Governance of Risk in Financial Institutions
Richard J. Herring

The Capital Conundrum
Richard J. Herring, September 2011

The Central Role of Resolution Policy in Dealing with Systemically Important Financial Institutions
Richard J. Herring, May 2011

Fair Value Accounting, Disclosure and Financial Stability: Does How We Keep Score Influence How the Game is Played?
Richard J. Herring

Judicial and Administrative Approaches to Bank Resolution: Prospects for International Harmonization
Charles Hendren

Framing and Claiming: How Information-Framing Affects Expected Social Security Claiming Behavior
Jeffrey R. Brown, Arie Kapteyn, and Olivia S. Mitchell, November 2011

2010 Working Papers

An Autoregressive Approach to House Price Modeling
Chaitra H. Nagaraja, Lawrence D. Brown and Linda H. Zhao, December 2009

On the Size of the Active Management Industry
Lubos Pastor and Robert F. Stambaugh, January 2010

Real-Time Macroeconomic Monitoring: Real Activity, Inflation, and Interactions
S. Boragan Aruoba and Francis X. Diebold, January 2010

Stale Prices and the Performance Evaluation of Mutual Funds
Meijun Qian
Forthcoming, Journal of Financial and Qualitative Analysis

High-water Marks and Hedge Fund Compensation
George O. Aragon and Jun “QJ” Qian, December 2009

In Defense of Much, But Not All, Financial Innovation
Robert E. Litan

Institutional Ownership, Analyst Following and Share Prices
Chitru S. Fernando, Vladimir A. Gatchev and Paul A. Spindt, February 2010

Wind-down Plans as an Alternative to Bailouts: The Cross-Border Challenges
Richard J. Herring

Living Wills as a Catalyst for Action
Emilios Avgouleas, Charles Goodhart and Dirk Schoenmaker, February 2010

Scenario Analysis in the Measurement of Operational
Risk Capital: A Change of Measure Approach
Kabir K. Dutta and David F. Babbel, September 2010
An updated version of this paper appears as Working Paper #12-15. This paper is forthcoming in the Journal of Risk and Insurance.

African Financial Systems: A Review
Franklin Allen, Isaac Otchere and Lemma W. Senbet, March 2010

The Mortgage and Financial Crises: The Role of Credit Risk Management and Corporate Governance
William W. Lang and Julapa Jagtiani, February 2010
Forthcoming in Atlantic Economic Journal, 2010

Tractability in Incentive Contracting
Alex Edmans and Xavier Gabaix, March 2010

The Financial Crisis: Miss-Diagnosis and Reactionary Responses
Robert A. Eisenbeis, October 2009

Thoughts on the Future of the Hedge Fund Industry
Christopher C. Geczy, April 2010

Specialization, Productivity and Financing Constraints
Robert Marquez and M. Deniz Yavuz, April 2010

Risk and the CEO Market: Why Do Some Large Firms Hire Highly-Paid, Low-Talent CEOs
Alex Edmans and Xavier Gabaix, May 2010

The African Financial Development Gap
Franklin Allen, Elena Carletti, Robert Cull, Jun “QJ” Qian and Lemma Senbet, September 2010
Earlier version of paper

Dynamic Incentive Accounts
Alex Edmans, Xavier Gabaix, Tomasz Sadzik and Yuliy Sannikov, May 2010
This is an updated version of #09-22

Financial Connections and Systemic Risk
Franklin Allen, Ana Babus and Elena Carletti, July 2010
This is an updated version of #09-33
For a more recent version, please see #10-30

How Important are Foreign Ownership Linkages for International Stock Returns?
Söhnke M. Bartram, John Griffin, and David Ng, June 2010

The Behavior of Intoxicated Investors: The Role of Institutional Investors in Propagating the Crisis of 2007-2008
Alberto Manconi, Massimo Massa, and Ayako Yasuda, June 2010

Behavioral Biases of Mutual Fund Investors
Warren Bailey, Alok Kuman, and David Ng, July 2010

Private Equity Fund Returns: Do Managers Actually Leave Money on the Table?
Robert Marquez, Vikram Nanda, and M. Deniz Yavuz, August 16, 2010

Breaking Down the Barriers: Competition, Syndicate Structure, and Underwriting Incentives
Anil Shivdasani and Wei-Ling Song, March 2010

A Note on Scenario Analysis in the Measurement of Operational Risk Capital: A Change of Measure Approach
David F. Babbel , September 2010

How Important Historically Were Financial Systems for Growth in the U.K., U.S., Germany, and Japan?
Franklin Allen, Forrest Capie, Caroline Fohlin, Hideaki Miyajima, Richard Sylla, Geoffrey Wood, and Yishay Yafeh, October 2010

Transmission of Bank Liquidity Shocks in Loan and Deposit Markets: The Role of Interbank Borrowing and Market Monitoring
Franklin Allen, Aneta Hryckiewicz, Oskar Kowalewski, and Günseli Tümer-Alkan, November 2010

Sterilization in China: Effectiveness and Cost
Chenying Zhang, September 2010

Asset Commonality, Debt Maturity and Systemic Risk
Franklin Allen, Ana Babus, and Elena Carletti, November 2010
This is an updated version of #10-20
An updated version of this paper appears at #11-58
Published as “Asset Commonality, Debt Maturity and Systemic Risk” (with A. Babus and E. Carletti), Journal of Financial Economics, 2012, 104, 519-534.


FIC Press

FICPress is the in-house publishing initiative of the Wharton Financial Institutions Center. Our authoritative publications bring together essays and papers by leading figures, from multiple disciplines, to disseminate current research and thinking on the global economy.

The following titles are available for free download:

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The U.S. Shadow Financial Regulatory Committee

The Shadow Financial Regulatory Committee is comprised of experts drawn from academic institutions and private organizations who meet each quarter to identify and analyze public policy issues regarding the financial services industry. Each meeting concludes with one or more policy statements written to clarify policy issues and recommend improvements in regulatory policy. (These statements are listed below.) Although the Committee meets at the offices of the American Enterprise Institute for Public Policy Research in Washington, D.C., it is independent and reflects a wide range of views. For further information about the U.S. Shadow Financial Regulatory Committee and links to the Shadow Financial Regulatory Committees in Asia, Europe, Japan and Latin America, please see Shadow Financial Regulatory Committee.

February 9, 2015

Statement No. 357: “The Fed’s SIFI Surcharge: An Alternative Proposal

May 19, 2014

Statement No 352: “Limiting Systemic Risk and Too-Big-to-Fail

February 10, 2014

Statement No 350: “Regulating to Beat the Clock: The Final Implementation of the Volcker Rule
Statement No 349: “Data Breaches and Payment System Risks

December 5 , 2011

Statement No. 321: “Creating a More Flexible and Accountable Basel System”
Statement No. 320:”A Regulatory Blueprint for Mismanaging the Sovereign Debt Crisis”
Statement No. 319: “The Financial Stability Board’s Methods for Defining Globally Systemic International Banks”
Statement No. 318: “MF Global and the Implications for the Primary Dealer Structure”

September 12 , 2011

Statement No. 317: “The Basel Proposed Rules on Liquidity Regulation and a Suggestion for a Better Approach”
Statement No. 316:”Improving the Regulatory Process and Financial Cost-Benefit Analysis”

May 2 , 2011

Statement No. 315: “Financial Asset Impairment Reserves”
Statement No. 314:”Reforming Credit Rating Organizations Under Dodd-Frank”
Statement No. 313: “The FDIC and Unintended Consequences of Dodd-Frank”
Statement No. 312: “Some Concerns about the FDIC and Federal Reserve System Proposed Rule on Resolution Planning”
Statement No. 311: “Risk-Retention in the Dodd-Frank Act”

February 14 , 2011

Statement No. 310: “The Crises in State and Municipal Pension Funds”
Statement No. 309: “Systemic Risk and Money Market Mutual Funds”
Statement No. 308: “Comment on the Treasury’s White Paper: Reforming the Housing Finance Market”
Statement No. 307: “Qualms about the Basel III Approach to Bank Capital Requirements”
Statement No. 306: “Recent Financial Stability Oversight Council’s Reports on Risk Retention and Proprietary Trading”
Statement No. 305: “Proposed Interagency Rule on Executive Compensation”

December 13, 2010

Statement No. 304: “Beyond Dodd-Frank”
Statement No. 303: “The Case for a Properly Structured Contingent Capital Requirement”
Statement No. 302: “Stress Testing the Fed”
Statement No. 301: “Federal Reserve Lending Programs”
Statement No. 300: “Principles to Guide the Implementation of the Orderly Liquidation Authority Called for Under the Dodd-Frank Act”

September 13, 2010

Statement No. 299: “Regulation of Broker-Dealers and the Dodd-Frank Act”
Statement No. 298: “The Monumental Task Assigned to the Fed”
Statement No. 297: “Proxy Access and the Market for Corporate Control”
Statement No. 296: “Missed Opportunities in the Dodd-Frank Act”
Statement No. 295: “Group of Governors and Heads of Supervision Statement on Capital Standards”

April 26, 2010

Statement No. 294: “Mortgage Backed Securities in the Federal Reserve’s Portfolio”
Statement No. 293: “Derivatives, Clearing and Exchange-Trading”
Statement No. 292: “Resolution and Bailout of Large Complex Financial Institutions”
Statement No. 291: “The FDIC’s Proposal for Setting Insurance Premia of Large Banks”
Statement No. 290: “Strengthening Transparency and Global Reporting Convergence”
Statement No. 289: “Resolving Systemically Important, International Financial Institutions”
Statement No. 288: “Transparency in Federal Reserve Emergency Financial Rescue Programs”

February 22 , 2010

Statement No. 287: “The Equity Markets: One Size Does Not Fit All”
Statement No. 286: “Resolution Regime for Troubled Financial Institutions”
Statement No. 285: “Improving the Transparency of the Cost of Policies that Expand the Financial Safety Net”
Statement No. 284: “Proposed Tax on Large Banks Is Poorly Designed and Premature”

December 14, 2009

Statement No. 283: “Regulation of Executive Compensation”
Statement No. 282: “The Importance of Addressing the Subsidization of Housing GSEs in Financial Reform Legislation”
Statement No. 281: “The Resolution of Large, Complex Financial Institutions”
Statement No. 280: “Reforming the Primary Dealer Structure”
Statement No. 279: “Audit of the Federal Open Market Committee Decisions”

September 14, 2009

Statement No. 278: “A New Consumer Financial Protection Agency”
Statement No. 277: “Reducing Interference with Accounting Standards and Devising Securities to Price Moral Hazard”
Statement No. 276: “Regulatory Initiatives of the Securities and Exchange Commission”
Statement No. 275: “Strenghthening the Resiliency of Money Market Mutual Funds”

May 4, 2009

Statement No. 274: “Reinstatement of Short-Sale Restrictions”
Statement No. 273: “Regulation of Financial Reporting”
Statement No. 272: “Refocusing Financial Rescue Plans”
Statement No. 271: “Monitoring Systematic Risk”

February 9, 2009

Statement No. 270: “Bank Bailouts and Borrower Bailouts”
Statement No. 269: “Restructuring Financial Regulation”
Statement No. 268: “The Need for More Transparency in Discretionary Financial Rescue Programs

December 8, 2008

Statement No. 267: “Regulatory Responses to the Current Crisis Have Undermined the Integrity of Tier 1 Capital and Tier 1 Capital Requirements”
Statement No. 266: “Fair Value Accounting”
Statement No. 265: “Regulation of Credit Rating Organizations”
Statement No. 264: “An Open Letter to President Elect Obama”

September 15 , 2008

Statement No. 263: “The Regulation of Investment Banking”
Statement No. 262: “The Future of the Government- Sponsored Enterprises”
Statement No. 261: “Regulation of Short Selling”

May 5, 2008

Statement No. 260: “Reducing Inappropriate Political Pressure on the Federal Resere Board”
Statement No. 259: “Mortgage Delinquencies and Foreclosures”
Statement No. 258: “If Bear Had Been a Bank”

February 11, 2008

Statement No. 257: “Reliance on Third Party Credit Ratings”
Statement No. 256: “Industrial Loan Company (ILC) Legislation”
Statement No. 255: “Facilitating Mortgage Renogiations: The Policy Issues”
Statement No. 254: “Facilitating FDIC Bank Failure Resolution”

December 10, 2007

Statement No. 253: “Would Basel II Have Helped Prevent the Subprime Turmoil”
Statement No. 252: “Doubts About the Master Liquidity Enhancement Conduit (M-LEC)”
Statement No. 251: “Government Sponsored Enterprises”
Statement No. 250: “Treasury Department’s Mortgage Foreclosure Program”

September 17 , 2007

Statement No. 249: “Financial Turmoil and Implications for Mortgages and Mortgage Related Securities”
Statement No. 248: “Lessons from Basel II from the Recent Financial Turmoil”

May 7, 2007

Statement No. 247: “Limitations on Auditors’ Liability”
Statement No. 246: “Allowing U.S. and EU Corporations to Adopt U.S. Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS)”
Statement No. 245: “Subprime Mortgage Lending Remedies and Concerns”
Statement No. 244: “The Usefulness of Hedge Fund Post-Mortems”
Statement No. 243: “The SEC’s Proposed Prohibition of Notching”

February 12, 2007

Statement No. 242: “The Competitiveness of U.S. Securities Markets”
Statement No. 241: “The FDIC’s ILC Moratorium”
Statement No. 240: “The Proposed Merger of Principal U.S. Futures Exchanges”
Statement No. 239: “Facilitating Bank Failure Resolution”

December 4. 2006

Statement No. 238: “Basel II: One-and-a-Half Cheers for the Standardized Approach”
Statement No. 237: “Shareholder Access to Director Elections”
Statement No. 236: “A Financial Agenda for the New Congress”

September 18, 2006

Statement No. 235: “Risks of Bank Concentration in Commercial Real Estate Lending”
Statement No. 234: “Enhancing Competition in the Sale of Stock Market Data”
Statement No. 233: “The FDIC’s Proposed Risk-Based Assessment System”

May 8, 2006

Statement No. 232: “Strengthening the Capital Structure of Federal Home Loan Banks”
Statement No. 231: “Welcome Actions by the Securities and Exchange Commission”
Statement No. 230: “Federal Preemption for Financial Services Firms”

February 13, 2006

Statement No. 229: “Open Letter to Federal Reserve Chairman Ben S. Bernanke”
Statement No. 228: “The Disclosure of Soft Dollars by Investment Advisers”
Statement No. 227: “Margin Regulations”
Statement No. 226: “FDIC Replenishing of the Deposit Insurance Fund”

December 5, 2005

Statement No. 225: “SEC Adoption of Communications Advances”
Statement No. 224: “Wal-Mart’s Pending Application to Acquire an Industrial Loan Company”
Statement No. 223: “Whatever Becomes of Basel II, Prompt Corrective Action and the Leverage Ratios Should be Preserved”

September 12, 2005

Statement No. 222: “Open Letter to SEC Chairman Christopher Cox”
Statement No. 221: “The Housing Enterprise Regulatory Reform Act of 2005 (S. 190)”

May 16, 2005

Statement No. 220: “Deposit Insurance Legislation ”
Statement No. 219: “Evaluating Section 404 of the Sarbanes-Oxley Act Concerning Internal Controls”
Statement No. 218: “Limiting GSE Portfolios”

February 14, 2005 

Statement No. 217: “Regulation NMS”
Statement No. 216: “Proposed Legislation to Regulate the GSEs”
Statement No. 215: “Sunset the PCAOB”
Statement No. 214: “Expanded FDIC Examination Authority”

December 6, 2004

Statement No. 213: “The Impending Crisis in Defined Benefit Pensions”
Statement No. 212: “The Financial Services Agenda for the Second Bush Administration”
Statement No. 211: “The Insurance Brokerage Scandal”

September 20, 2004

Statement No. 210: “The SEC’s Proposal for Regulating Hedge Funds”
Statement No. 209: “International Accounting Standards”
Statement No. 208: “The Pressing Need for Corporate Pension Reform”

May 24, 2004

Statement No. 207: “The Possible Extension of the Terrorism Risk Insurance Act”
Statement No. 206: “Prohibition of Directed Brokerage and Other Abuses by Investment Management Companies”
Statement No. 205: “Regulation NMS and Securities Market Structure”

February 9, 2004

Statement No. 204: “Enabling Institutional Investors to Play a More Effective Role in Corporate Governance”
Statement No. 203: “Toward a Single Transatlantic Market in Financial Services”

September 22, 2003

Statement No. 198: “Taxpayer Exposure to Liabilities of the Pension Benefit Guarantee Corporation”
Statement No. 197: “The Responsibilities of Financial Professionals and Firms in Recent Financial Scandals”
Statement No. 196: “Legislation on Fannie Mae and Freddie Mac”
Statement No. 195: “Predatory Lending and Federal Preemption of State Laws”

May 5, 2003

Statement No. 194: “Removal of Archaic Bank Regulatory Restrictions”
Statement No. 193: “The Latest Revisions to Basel II and Implementation Plans in the United States”
Statement No. 192: “Enforcement Settlement with Wall Street Investment Firms”
Statement No. 191: “The European Union’s Financial Conglomerate Directive”
Statement No. 190: “Access by Institutional Investors to Foreign Electronic Trading Venues”

February 24, 2003

Statement No. 189: “The Registration of Mortgage Backed Securities of Fannie Mae and Freddie Mac”
Statement No. 188: “Glass Steagall, Tying and Conflicts of Interest”
Statement No. 187: “The SEC’s Concern with Short Selling”
Statement No. 186: “State and Federal Securities Market Regulation”

December 9, 2002

Statement No. 185: “A Financial Agenda for the New Congress”
Statement No. 184: “Disclosure of Portfolio Holdings of Registered Investment Companies”
Statement No. 183: “SEC Standards for Designating Nationally-Recognized Credit Rating Organizations”

September 23, 2002

Statement No. 182: “A Proposed Federal Backstop for Terrorism Insurance and Reinsurance”
Statement No. 181: “Fannie Mae’s Duration Gap”

May 5, 2002

Statement No. 180: “The Responsibility of Independent Auditors to Shareholders of Publicly Traded Corporations”
Statement No. 179: “The Basel 2 Approach to Bank Operational Risk”
Statement No. 178: “Statement on Shays-Markey Bill on GSE Disclosure”

February 25, 2002

Statement No. 177: “Pension Reform in the Wake of Enron’s Collapse”
Statement No. 176: “Enron and Accounting Issues”
Statement No. 175: “The Gramm-Leach-Bliley Act”

December 3, 2001

Statement No. 174: “Deposit Insurance Reform”
Statement No. 173: “Predatory Lending”
Statement No. 172: “Terrorism Insurance”

May 7, 2001

Statement No. 171: “Assuring Discipline of the Housing GSEs”
Statement No. 170: “Optional Federal Chartering of Insurance Companies”

February 26, 2001

Statement No. 169: “The Basel Committee’s Revised Capital Accord Proposal”
Statement No. 168: “Requiring Large Banks to Issue Subordinated Debt”

December 4, 2000

Statement No. 167: “Comptrollers’ Proposed Pilot Program Permitting Increased Lending Limits for Community Banks”
Statement No. 166: “An Open Letter to the New President and Congress on an Agenda for Financial Reform”
Statement No. 165: “Deposit Insurance Reform Options”

September 25, 2000

Statement No. 164: “Privatizing the Housing GSEs”
Statement No. 163: “The Regulation of Derivative Instruments”

May 8, 2000

Statement No. 162: “Increasing Deposit Insurance Coverage to $200,000”
Statement No. 161: “Full Cost Pricing of Supervisory and Examination Services”

March 2, 2000

Statement No. 160: “Reforming Bank Capital Regulation”

December 13, 1999

Statement No. 159: “Federal Home Loan Banks”
Statement No. 158: “Proposed Federal Catastrophe Reinsurance”

September 27, 1999

Statement No. 157: “The Failures of BestBank and First National Bank of Keystone”
Statement No. 156: “The Basle Committee’s New Capital Adequacy Framework”

April 26, 1999

Statement No. 155: “The Latest Round of Bills on Financial Modernization”
Statement No. 154: “Revising the Basle Capital Standards”

December 7, 1998

Statement No. 153: “The Federal Reserve Board and Prudential Supervision”
Statement No. 152: “The G7’s New Precautionary Credit Line Facility for the IMF and its Use in Brazil”

September 28, 1998

Statement No. 151: “The Issues Posed by the Near-Collapse of Long-Term Capital Management”
Statement No. 150: “The Senate’s Version of H.R.10”
Statement No. 149: “The Use of Private Credit Ratings for Determining Capital Requirements for Securitization”
Statement No. 148: “Principles for Reforming the ‘Global Financial Architecture'”

May 4, 1998

Statement No. 147: “Mergers and Acquisitions in the Banking Industry”
Statement No. 146: “The Credit Union Membership Access Act, H.R. 1151”
Statement No. 145: “International Monetary Fund Assistance and International Crises”
Statement No. 144: “Expanded Powers for Federal Home Loan Banks”

December 7, 1997

Statement No. 143: “Sweep Accounts and the Prohibition on Paying Interest on Reserve Balances and Demand Deposits”
Statement No. 142: “Congress and Financial Reform”
Statement No. 141: “Strategic Plans of Federal Financial Institution Regulatory Agencies”

September 22, 1997

Statement No. 140: “Mortgage Lending by Federal Home Loan Banks”
Statement No. 139: “H.R. 10 (“Leach Bill”) and the Commerce Subcommittee Draft”

May 5, 1997

Statement No. 138: “Restrictions on Banking-Commerce Affiliations”
Statement No. 137: “Bank Activities and the Extension of Bank Subsidies”

December 9, 1996

Statement No. 136: “Recent Fed and OCC Rulings on Permissible Bank Activities”
Statement No. 135: “An Open Letter to President Clinton on Financial Reform”

May 6, 1996

Statement No. 134: “A Proposal for Privatization of the Federal Home Loan Bank System”
Statement No. 133: “Proposed Legislation on Enterprise Resource Banks (The “Baker Bill”, H.R. 3167)”
Statement No. 132: “Disclosure of Examination Reports and Ratings”

February 12, 1996

Statement No. 131: “Extending the Credit Reform Act to GSEs”
Statement No. 130: “Expansion of Bank Powers by Regulation”

December 11, 1995

Statement No. 129: “Ownership of Stock by Bank Directors”
Statement No. 128: “Bank Merger Law and Policy”
Statement No. 127: “Reduction in Premiums for BIF-Insured Institutions”
Statement No. 126: “Values of Bank Capital Tripwires for Prompt Corrective Action and Least Cost Resolution”

September 18, 1995

Statement No. 125: “Alternatives to Recapitalizing the Savings Association Insurance Fund and Defeasing the FICO Bonds”
Statement No. 124: “The Banking Agencies’ Proposed Interest Rate Risk Capital Standards”

May 22, 1995

Statement No. 123: “Alternatives to Recapitalizing the Savings Association Insurance Fund”
Statement No. 122: “Federal Reserve Proposal for Pricing Daylight Overdrafts”
Statement No. 121: “Proposed Amendments to Part 5 of the Regulations of the Office of the Comptroller of the Currency”
Statement No. 120: “The Leach Bill”
Statement No. 119: “Wholesale Banking Proposal Under H.R. 1062”
Statement No. 118: “Principles of Bank Reform-Guidelines fir Assessing Pending Legislative Proposals”

February 13, 1995

Statement No. 117: “Emergency Assistance for Mexico”
Statement No. 116: “Open Letter on Financial Reform to the Senate and House Banking Committees”

December 12, 1994

Statement No. 115: “Repeal of the Bank Holding Company Act and Restrictions on Product Diversification for Banking Organizations”
Statement No. 114: “FDIC Insurance Assessments”
Statement No. 113: “Proposed Community Reinvestment Act Regulations”
Statement No. 112: “Regulatory Agency Measurement of Bank Capital for Prompt Corrective Action”

September 26, 1994

Statement No. 111: “Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994”
Statement No. 110: “Final Rules on Incorporating Concentrations of Credit Risks Into Risk-Based Capital Standards”

May 23, 1994

Statement No. 109: “Financial Accounting Standard 1.1.5”
Statement No. 108: “Proposed Increases in FHA Insurance Limits”
Statement No. 107: “Federal Displacement of State Laws: Fair Credit Reporting and Interstate Branching”
Statement No. 106: “Proposed Lengthening of Examination Schedules and Required Independent Audits for Thrift Institutions”

February 14, 1994

Statement No. 105: “Proposed Revisions to Community Reinvestment Regulations”
Statement No. 104: “Mutual to Stock Conversions of Thrift Institutions”
Statement No. 103: “Principles of Regulatory Restructuring”