The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Discussion
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00270
Robert Marquez
Risk and the Corporate Structure of Banks
Published: 05/07/2010 | DOI: 10.1111/j.1540-6261.2010.01561.x
GIOVANNI DELL'ARICCIA, ROBERT MARQUEZ
We identify different sources of risk as important determinants of banks' corporate structures when expanding into new markets. Subsidiary‐based corporate structures benefit from greater protection against economic risk because of affiliate‐level limited liability, but are more exposed to the risk of capital expropriation than are branches. Thus, branch‐based structures are preferred to subsidiary‐based structures when expropriation risk is high relative to economic risk, and vice versa. Greater cross‐country risk correlation and more accurate pricing of risk by investors reduce the differences between the two structures. Furthermore, a bank's corporate structure affects its risk taking and affiliate size.
Lending Booms and Lending Standards
Published: 09/19/2006 | DOI: 10.1111/j.1540-6261.2006.01065.x
GIOVANNI DELL'ARICCIA, ROBERT MARQUEZ
We examine how the informational structure of loan markets interacts with banks' strategic behavior in determining lending standards, lending volume, and the aggregate allocation of credit. We show that, as banks obtain private information about borrowers and information asymmetries across banks decrease, banks may loosen their lending standards, leading to an equilibrium with deteriorated bank portfolios, lower profits, and expanded aggregate credit. These lower standards are associated with greater aggregate surplus and greater risk of financial instability. We therefore provide an explanation for the sequence of financial liberalization, lending booms, and banking crises observed in many emerging markets.