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| Hart, Oliver; Zingales, Luigi. |
| We design a new, implementable capital requirement for large financial institutions (LFIs) that are too big to fail. Our mechanism mimics the operation of margin accounts. To ensure that LFIs do not default on either their deposits or their derivative contracts, we require that they maintain an equity cushion sufficiently great that their own credit default swap price stays below a threshold level, and a cushion of long term bonds sufficiently large that, even if the equity is wiped out, the systemically relevant obligations are safe. If the CDS price goes above the threshold, the LFI regulator forces the LFI to issue equity until the CDS price moves back down. If this does not happen within a predetermined period of time, the regulator intervenes. We show... |
| Tipo: Working or Discussion Paper |
Palavras-chave: Banks; Capital Requirement; Too Big to Fail; Financial Economics; G21; G28. |
| Ano: 2009 |
URL: http://purl.umn.edu/56220 |
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| Aghion, Philippe; Van Reenen, John; Zingales, Luigi. |
| We find that institutional ownership in publicly traded companies is associated with more innovation (measured by cite-weighted patents). To explore the mechanism through which this link arises, we build a model that nests the lazy-manager hypothesis with career-concerns, where institutional owners increase managerial incentives to innovate by reducing the career risk of risky projects. The data supports the career concerns model. First, whereas the lazy manager hypothesis predicts a substitution effect between institutional ownership and product market competition (and managerial entrenchment generally), the career-concern model allows for complementarity. Empirically, we reject substitution effects. Second, CEOs are less likely to be fired in the face of... |
| Tipo: Working or Discussion Paper |
Palavras-chave: Career Concerns; Innovation; Institutional Ownership; Productivity and R&D; Financial Economics; G20; G32; O31; O32; O33. |
| Ano: 2010 |
URL: http://purl.umn.edu/93414 |
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