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Does a bank’s dependence on different external funding sources shape its voluntary disclosure of information? We evaluate whether economic shocks that increase the supply of bank deposits alter the cost–benefit calculations of bank managers concerning voluntary information disclosure. We measure information disclosure using 10-K filings, 8-K filings, and earnings guidance. As for the funding shock, we use unanticipated technological innovations that triggered shale development and booms in bank deposits. Further analyses suggest that greater exposure to shale development reduced information disclosure by relaxing the incentives for managers to disclose information to attract funds from external capital markets. This paper was accepted by Kay Giesecke, finance.

We assess the impact of geographic diversification on a bank’s costs of interest-bearing liabilities. We employ a new identification strategy and discover that geographic expansion across U.S. states lowered funding costs. Consistent with expansion facilitating risk diversification, we find that (1) funding costs fall more when banks expand into states whose economies are less correlated with the banks’ state and (2) geographic diversification reduces the costs of uninsured, but not insured, deposits. Consistent with expansion intensifying agency frictions, which puts upward pressures on funding costs, we discover that geographic diversification reduces the costs of interest-bearing liabilities more in better-monitored and better-run banks. This paper was accepted by Tomasz Piskorski, finance.

Does the predeal geographic overlap of the branches of two banks affect the probability that they merge, postannouncement stock returns, and postmerger performance? We compile information on U.S. bank acquisitions from 1984 through 2016, construct several measures of network overlap, and design and implement a new identification strategy. We find that greater predeal network overlap (1) increases the likelihood that two banks merge; (2) boosts the cumulative abnormal returns of the acquirer, target, and combined banks; and (3) reduces employment, boosts revenues, reduces the number of branches, improves loan quality, and expedites executive turnover. This paper was accepted by Tomasz Piskorski, finance.

We investigate how communication within banks affects small business lending. Using travel times between a bank’s headquarters and its branches to proxy for the costs of communicating soft information, we exploit shocks to these travel times—the introduction of new airline routes—to evaluate the impact of within-bank communication costs on small business loans. We find that reducing headquarters-branch travel time boosts small business lending in the branch’s county. Several extensions suggest that new airline routes facilitate in-person communications that boost small-firm lending.

We evaluate the impact of the African slave trade between 1400 and 1900 on modern household finance. Exploiting cross-country and cross-ethnic group differences in the intensity with which people were enslaved and exported from Africa, we find that slave exports during the 1400–1900 period are negatively associated with current measures of household (a) access to financial services, (b) access to credit, (c) use of mobile finance and (d) trust in financial institutions, suggesting that the slave trade has had an enduring, deleterious effect on household finance.

Do antitrust laws influence corporate valuations? We evaluate the relationship between firm value and laws limiting firms from engaging in anticompetitive agreements, abusing dominant positions, and conducting M&As that restrict competition. Using firm-level data from 99 countries over the 1990-2010 period, we discover that valuations rise after countries strengthen competition laws. The effects are larger among firms with more severe pre-existing agency problems: firms in countries with weaker investor protection laws, with weaker firm-specific governance provisions, and with greater opacity. The results suggest that antitrust laws that intensify competition exert a positive influence on valuations by reducing agency problems. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

What is the impact of credit conditions on family interactions and children’s human capital development? We discover that regulatory reforms that ease credit conditions are associated with (1) increases in labor demand and the employment of mothers from low-income families, (2) decreases in parent-child discussions about school, reductions in parental supervision, and increases in children’s TV watching and video game playing among low-income families, and (3) declines in the time that children spend on homework and children’s academic performance among those same families. Effective substitutes for parent-child interactions, such as grandparents living in the household, mitigate these effects.

Why did banks experience massive deposit inflows during the first months of the pandemic? Using weekly branch-level data on interest rates and county-level data on COVID-19 cases, we discover that interest rates at bank branches in counties with higher COVID-19 infection rates fell by more than rates at other branches—even branches of the same bank in different counties. When differentiating weeks by the degree of stock market distress and counties by the likely impact of COVID-19 cases on economic anxiety, the evidence suggests that the deposit inflows were triggered by a surge in the supply of precautionary savings.

This paper studies whether there is a connection between finance and growth at the firm level. It employs a new dataset of 150,165 equity and bond issuances around the world, matched with income and balance sheet data for 62,653 listed firms in 65 countries over 1990–2016. Three main patterns emerge from the analyses. First, firms that choose to issue in capital markets use the funds raised to grow by enhancing their productive capabilities, increasing their tangible and intangible capital and the number of employees. Growth accelerates as firms raise funds. Second, the faster growth is more pronounced among firms that are more likely to face tighter financing constraints, namely, small, young, and high-R&D firms. Third, capital market issuances are associated with faster growth among firms located in countries with more developed capital markets relative to banks. Capital markets are also comparatively effective at allowing financially constrained firms to raise capital.

Theory offers differing perspectives and predictions about the impact of product market competition on corporate social responsibility (CSR). Using firm-level data on CSR from 2002 through 2015 and panel data on competition laws in 48 countries, we discover that intensifying competition induces firms to increase CSR activities. Analyses indicate that (a) intensifying competition spurs firms to invest more in CSR as a strategy for strengthening relationships with workers, suppliers, and customers and (b) the competition-CSR effect is stronger in economies where social norms prioritize CSR-type activities, e.g., treating others fairly, satisfying implicit agreements, protecting the environment, etc.

We evaluate the role of insider ownership in shaping banks’ equity issuances in response to the global financial crisis. We construct a unique dataset on the ownership structure of U.S. banks and their equity issuances and discover that greater insider ownership leads to less equity issuances. Several tests are consistent with the view that bank insiders are reluctant to reduce their private benefits of control by diluting their ownership through equity issuances. Given the connection between bank equity and lending, the results stress that ownership structure can shape the resilience of banks—and hence the entire economy—to aggregate shocks. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

A central debate in economics concerns the relationship between competition and innovation, with some stressing that competition discourages innovation by reducing post-innovation rents and others emphasizing that more contestable markets spur currently dominant and other firms to invest more in innovation. We examine the impact of competition laws on innovation. We create a unique firm-level dataset on patenting activities that includes over 1.4 million firm-year observations, across 68 countries, from 1991 through 2015. Using a new, comprehensive dataset on competition laws, we find that more stringent competition laws are associated with increases in firms’ number of self-generated patents and the citation-impact and explorative nature of those patents. We also conduct the first examination of the relationship between competition laws and firms’ acquisition of patents from other firms. We find that competition increases patent acquisitions but lowers the ratio of acquired to self-generated patents. The results hold when using country-industry data on 186 countries over the 1888-2015 period.

What is the impact of regulatory reforms that enhance credit market efficiency on children’s human capital? Using a parent-child panel dataset, we find that such reforms reduced children’s academic performance in low-income families. Consistent with the view that financial development entices low-income parents to substitute out of childrearing and into employment with adverse effects on children’s education, we find that among low-income families, regulatory reforms: increased mother’s employment hours, reduced parental supervision and parent-child discussions about school and college, and had bigger adverse effects when mothers were not already working full-time and grandparents were not living with the child. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

We evaluate the connection between corporate characteristics and the reaction of stock returns to COVID-19 cases using data on more than 6,700 firms across 61 economies. The pandemic-induced drop in stock returns was milder among firms with stronger pre-2020 finances (more cash and undrawn credit, less total and short-term debt, and larger profits), less exposure to COVID-19 through global supply chains and customer locations, more corporate social responsibility activities, and less entrenched executives. Furthermore, the stock returns of firms controlled by families (especially through direct holdings and with non-family managers), large corporations, and governments performed better, and those with greater ownership by hedge funds and other asset management companies performed worse. Stock markets positively price small amounts of managerial ownership but negatively price high levels of managerial ownership during the pandemic.

Does the structure of the financial system influence the economy’s resilience to adverse shocks? Using high-frequency, U.S. county-level data on employment, small business revenue, and COVID-19 cases, we discover that employment, especially the employment of low-income workers, and the revenues of small firms fall by less in response to local COVID-19 cases in counties with a larger proportion of small banks. Furthermore, small banks increase lending to small businesses more than large banks in response to the pandemic. Evidence suggests that small banks provide countercyclical funding to small firms following an adverse shock, with positive repercussions on employment.

Theory offers differing perspectives and predictions about the impact of product market competition on corporate social responsibility (CSR). Using firm-level data on CSR from 2002 through 2015 and panel data on competition laws in 48 countries, we discover that intensifying competition induces firms to increase CSR activities as a strategy for strengthening relationships with workers, suppliers, and customers. The CSR-enhancing effects of competition depend on corporate ownership, with smaller effects among block-holders with shorter horizons (e.g., hedge funds) and among family-controlled firms. Furthermore, the competition-CSR effect is stronger (a) among less financially constrained firms that are better positioned to boost CSR activities and (b) in economies where social norms prioritize CSR activities, as this is where the relationship building effect of CSR are likely to be the greatest.

Theory offers differing perspectives and predictions about the impact of product market competition on corporate social responsibility (CSR). Using firm-level data on CSR from 2002 through 2015 and panel data on competition laws in 48 countries, we discover that intensifying competition induces firms to increase CSR activities. Analyses indicate that (a) intensifying competition spurs firms to invest more in CSR as a strategy for strengthening relationships with workers, suppliers, and customers and (b) the competition-CSR effect is stronger in economies where social norms prioritize CSR-type activities, e.g., treating others fairly, satisfying implicit agreements, protecting the environment, etc. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

England's financial revolution in the eighteenth century has long been hailed as a key contributor to the world's first Industrial Revolution. Later, in the nineteenth century, roles change in standard narratives – finance turns from hero into villain, with Victorian economic “failure” a result of excessive financial development. This survey argues for the exact opposite. England's financial revolution was strictly limited to public finance, enabling an explosion of public borrowing that stifled economic activity in the century up to 1815. It was only afterwards that finance began to fulfill its promise, enabling the country's rise to become the undisputed workshop of the world by the 1850s. Finally, there is no evidence of Victorian failure through excessive capital exports. In sum, the English case eloquently demonstrates the risks of financial repression – and the vast benefits from repealing outdated rules and regulations.

This paper studies whether there is a connection between finance and growth at the firm level. It employs a new dataset of 150,165 equity and bond issuances around the world, matched with income and balance sheet data for 62,653 listed firms in 65 countries over 1990-2016. Three main patterns emerge from the analyses. First, firms that choose to issue in capital markets use the funds raised to grow by enhancing their productive capabilities, increasing their tangible and intangible capital and the number of employees. Growth accelerates as firms raise funds. Second, the faster growth is more pronounced among firms that are more likely to face tighter financing constraints, namely, small, young, and high-R&D firms. Third, capital market issuances are associated with faster growth among firms located in countries with more developed capital markets relative to banks. Capital markets are also comparatively effective at allowing financially constrained firms to raise capital.

We assess whether restrictions on insider trading accelerate or slow technological innovation. Using over 80,000 industry-country-year observations across 74 economies from 1976 to 2006, we...

Using a unique dataset on gaming and credit cards, we discover that default rates are higher among individuals who spend more, more frequently, and more erratically on video games, and among those who have more and more diverse games on their mobile devices. These results are less pronounced when spending occurs on weekends or bad weather days and more pronounced among overnight spenders. The findings are not driven by financial literacy or specific game types. Furthermore, intense gamers increase luxury, addictive, and impulsive expenditures more after receiving credit cards. Models of self-control offer a consistent explanation of our findings.

We investigate how communication within banks affects small business lending. Using travel time between a bank’s headquarters and its branches to proxy for the costs of communicating soft information, we exploit shocks to these travel times to evaluate the impact of within bank communication costs on small business loans. Consistent with Stein’s (2002) model of the transmission of soft information across a bank’s hierarchies, we find that reducing headquarters-branch travel time boosts small business lending in the branch’s county. Several extensions suggest that new airline routes facilitate the transmission of soft information, boosting small firm lending.

Does the pre-deal geographic overlap of the branches of two banks affect the probability that they merge, post-announcement stock returns, and post-merger performance? We compile information on U.S. bank acquisitions from 1984 through 2016, construct several measures of network overlap, and design and implement a new identification strategy. We find that greater pre-deal network overlap (1) increases the likelihood that two banks merge, (2) boosts the cumulative abnormal returns of the acquirer, target, and combined banks, and (3) reduces employment, boosts revenues, reduces the number of branches, improves loan quality, and expedites executive turnover.

We develop a new identification strategy to evaluate the impact of the geographic expansion of a bank holding company (BHC) across US metropolitan statistical areas (MSAs) on BHC risk. For the average BHC, the instrumental variable results suggest that geographic expansion materially reduces risk. Geographic diversification does not affect loan quality. The results are consistent with arguments that geographic expansion lowers risk by reducing exposure to idiosyncratic local risks and inconsistent with arguments that expansion, on net, increases risk by reducing the ability of BHCs to monitor loans and manage risks.

Do stock markets act as a spare tire during banking crises, providing an alternative corporate financing channel and mitigating the economic severity of these crises? Using firm-level data in 36 countries from 1990 through 2011, we find that the adverse consequences of banking crises on equity issuances, firm profitability, employment, and investment efficiency are smaller in countries with stronger shareholder protection laws. These findings are not explained by the development of stock markets or financial institutions prior to the crises, the severity of the banking crisis, or overall economic, legal, and institutional development.

Although research shows that competitive banks spur corporate growth, less is known about the impact of bank competition on corporate risk. Using a sample of more than 70,000 firm-year observations covering the period from 1975 through 1994, we find that deregulation that intensified competition among banks materially reduced corporate risk, especially among firms that rely heavily on bank finance. We find that competition-enhancing bank deregulation reduced corporate volatility by easing credit constraints when firms experience adverse shocks and reducing the procyclicality of borrowing.

We study the impact of pollution on the migration of high human capital employees. We link data on the opening of toxic-emitting plants with the career paths of executives at S&P 1500 firms. We discover that toxic-emitting plant openings increase executive departures from neighboring firms with adverse effects on stock prices. The results: are larger when polluting plants and firms are geographically closer, hold only for executives physically-based at treated firms, hold only for the opening of polluting plants, do not reflect other local factors or prior stock price performance, and are larger among executives with more general human capital.

We evaluate the impact of the credit conditions facing corporations on their emissions of toxic air pollutants. Exploiting cross-county, cross-time shale discoveries that generated liquidity windfalls at local bank branches, we construct measures of (1) the degree to which banks in non-shale counties, i.e., counties where shale was not discovered, receive liquidity shocks through their branches in shale counties and (2) the degree to which a corporation in a non-shale county has a relationship lender that receives liquidity shocks through its branches. From both the county- and firm-level analyses, we discover that positive shocks to credit conditions reduce corporate pollution.

We study the impact of toxic emissions on the migration of corporate executives. We link data on the opening of industrial plants emitting toxic air pollutants with information on the career paths of executives at all S&P 1500 firms over the 1996-2014 period. We find that (1) the opening of toxic emitting plants increases the rate at which executives leave geographically close firms and move to firms in less polluted areas, (2) stock returns fall when these “treated” executives announce their departures, and (3) the replacement executives have less experience than the departing executives.

Given the importance of transparency for the governance, efficiency, and stability of banks, we evaluate whether economic shocks that relax a bank’s dependence on external capital markets alter the cost-benefit calculations of bank managers concerning voluntary information disclosure. We measure information disclosure based on 10-K filings, 8-K filings, earnings guidance, and stock market liquidity. As a funding shock, we use unanticipated technological innovations that triggered shale development and deposit booms. Greater exposure to shale development reduced information disclosure, suggesting that deposit windfalls relax the incentives for managers to disclose information to attract funds.

Is financial innovation necessary for sustaining economic growth? To address this question, we build a Schumpeterian model in which entrepreneurs earn profits by inventing better goods and profit-maximizing financiers arise to screen entrepreneurs. The model has two novel features. First, financiers engage in the costly but potentially profitable process of innovation: they can invent better methods for screening entrepreneurs. Second, every screening process becomes less effective as technology advances. The model predicts that technological innovation and economic growth eventually stop unless financiers innovate. Empirical evidence is consistent with this dynamic, synergistic model of financial and technological innovation.

Does the pre-deal geographic overlap of the subsidiaries and branches of two banks affect the probability that they merge and post-merger value creation and synergies? We compile comprehensive information on U.S. bank acquisitions from 1986 through 2014, construct several measures of network overlap, and design and implement a new identification strategy. We find that greater pre-deal network overlap (1) increases the likelihood that two banks merge, (2) boosts the cumulative abnormal returns of the acquirer, target, and combined banks, and (3) is associated with larger labor cost reductions, managerial turnover, loan quality improvements, and revenue enhancements at target banks.

We evaluate the impact of the African slave trade between 1400 and 1900 on modern household finance. Exploiting cross-country and cross-ethnic group differences in the intensity with which people were enslaved and exported from Africa, we find that slave exports during the 1400-1900 period are negatively associated with current measures of household (a) access to financial services, (b) access to credit, (c) use of mobile finance, and (d) trust in financial institutions, suggesting that the slave trade has had an enduring, deleterious effect on household finance.

Although policymakers often discuss tradeoffs between competition and stability, past research provides differing theoretical perspectives and conflicting empirical results on whether competition destabilizes banks. In this paper, we employ a new approach for identifying exogenous changes in the competitive pressures facing individual banks and use this approach to assess the impact of competition on bank risk. We discover that an intensification of bank competition materially boosts bank risk. We also find suggestive evidence that this positive relationship is driven by reduced bank profit margins, lowered bank charter value, provision of nontraditional services, and diminished relationship lending.

PurposeThe purpose of this paper is to discuss and provide new data and measures of bank regulatory and supervisory policies in 180 countries from 1999 to 2011.Design/methodology/approachThe authors' approach is based upon the quantification of hundreds of questions, including information on permissible bank activities, capital requirements, the powers of official supervisory agencies, information disclosure requirements, external governance mechanisms, deposit insurance, barriers to entry, and loan provisioning, to form indices of key bank regulatory and supervisory policies.FindingsIt is found that the regulation and supervision of banks varies widely across countries in many different dimensions. Furthermore, there has not been a convergence in bank regulatory regimes over the past decade despite the worst global financial crisis since the Great Depression.Research limitations/implicationsThe data are based on survey responses and this requires that the answers be accurate. To better ensure this is the case, several checks were made to ensure greater accuracy in all the answers. Using this database one can perform various statistical analyses in attempt to determine which bank regulatory regimes work best to promote well‐functioning banking systems.Originality/valueThe authors' data and measures are new and unique so as enable policy makers and researchers to examine cross‐country comparisons and analyses of changes in banking policies over time.

This paper assesses the impact of the geographic diversification of bank holding company (BHC) assets across the United States on their market valuations. Using two new identification strategies based on the dynamic process of interstate bank deregulation, we find that exogenous increases in geographic diversity reduced BHC valuations. We also find that the geographic diversification of BHC assets increased insider lending and reduced loan quality. Taken together, these findings are consistent with theories predicting that geographic diversity intensifies agency problems. The Author 2013. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com., Oxford University Press.

We use a new identification strategy to assess whether an intensification of competition among banks increases or decreases the provision of a key banking service: liquidity creation. Although theory offers conflicting predictions about the impact of competition on liquidity creation, we find that regulatory-induced competition reduces liquidity creation. Consistent with a subset of models emphasizing that banks pushed toward insolvency reduce risk-taking activities, we discover that regulatory-induced competition reduces liquidity creation more among banks with less risk-absorbing capacity (e.g., less profitable banks).

We use a new identification strategy to assess whether an intensification of competition among banks increases or decreases liquidity creation, which is a vital service that banks provide to the economy. We create a measure of the time-varying exposure of each bank in the United States to competition from banks headquartered in other states, as states lowered regulatory barriers to competition in the 1980s and 1990s. We find that regulatory-induced competition reduced liquidity creation. Consistent with specific theoretical models, we also find that these liquidity-destroying effects are smaller among more profitable banks and larger among smaller banks.

Are firms more resilient to systemic banking crises in economies with higher levels of social trust? Using firm-level data in 34 countries from 1990 through 2011, we find that liquidity-dependent firms in high-trust countries obtain more trade credit and suffer smaller drops in profits and employment during banking crises than similar firms in low-trust economies. The results are consistent with the view that when banking crises block the normal banking-lending channel, greater social trust facilitates access to informal finance, cushioning the effects of these crises on corporate profits and employment.

There was a systemic failure of financial regulation: Senior policymakers repeatedly enacted and implemented policies that destabilized the global financial system, and the authorities maintained these policies even as they learned about the deleterious consequences of their policies during the decade before the crisis. The absence of an informed, expertly staffed, and independent institution that evaluates financial regulation from the public’s perspective is a critical defect in the governance of financial regulation ‐ the system associated with selecting, enforcing, and reforming financial policies. I propose a new institution to address this defect. I. INTRODUCTION This paper’s first objective is to document that systemic weaknesses with the governance of financial regulation ‐ the system associated with designing, implementing, and reforming financial policies ‐ contributed to the global financial crisis. Senior officials repeatedly designed, implemented, and most importantly, maintained policies that destabilized financial markets. Regulators maintained these policies even when they learned that their policies were increasing financial system fragility. Moreover, the authorities acquired this information during the decade before the crisis, when they had ample time and power to adjust their policies under relatively calm conditions. Nonetheless

Purpose – The purpose of this postmortem is to assess whether the design, implementation, and maintenance of financial policies during the period from 1996 through 2006 were primary causes of the financial system's demise.Design/methodology/approach – To draw conclusions about the policy determinants of the crisis, the paper studies five important policies: Securities and Exchange Commission (SEC) policies toward credit rating agencies, Federal Reserve policies concerning bank capital and credit default swaps, SEC and Federal Reserve policies about over‐the‐counter derivatives, SEC policies toward the consolidated supervision of major investment banks, and government policies toward two housing‐finance entities, Fannie Mae and Freddie Mac.Findings – The evidence is inconsistent with the view that the collapse of the financial system was caused only by the popping of the housing bubble (“accident”) and the herding behavior of financiers rushing to create and market increasingly complex and questionable fin...

Thermal maturation patterns of Pennsylvanian strata in the Appalachian basin were determined by compiling and contouring published and unpublished vitrinite reflectance (VR) measurements. VR isograd values range from 0.6% in eastern Ohio and eastern Kentucky (western side of the East Kentucky coal field) to greater than 5.5% in eastern Pennsylvania (Southern Anthracite field, Schuylkill County), corresponding to ASTM coal rank classes of high volatile C bituminous to meta-anthracite. VR isograds show that thermal maturity of Pennsylvanian coals generally increases from west to east across the basin. The isograds patterns, which are indicative of maximum temperatures during burial, can be explained by variations in paleodepth of burial, paleogeothermal gradient, or a combination of both. However, there are at least four areas of unusually high-rank coal in the Appalachian basin that depart from the regional trends and are difficult to explain by depth of burial alone: 1) a west-northwestward salient centered in southwestern Pennsylvania; 2) an elliptically-shaped, northeast-trending area centered in southern West Virginia and western Virginia; 3) the eastern part of Black Warrior coal field, Alabama; and 4) the Pennsylvania Anthracite region, in eastern Pennsylvania. High-rank excursions in southwest Pennsylvania, the Black Warrior coal field, and the Pennsylvania Anthracite region are interpreted here to represent areas of higher paleo-heat flow related to syntectonic movement of hot fluids towards the foreland, associated with Alleghanian deformation. In addition to higher heat flow from fluids, the Pennsylvania Anthracite region also experienced greater depth of burial. The high-rank excursion in southwest Virginia was probably primarily controlled by overburden thickness, but may also have been influenced by higher geothermal gradients.

This article introduces the updated and expanded version of the Financial Development and Structure Database. The database includes indicators on the size, efficiency, and stability of banks, nonbank financial institutions, and equity and bond markets over 1960--2007. It also contains indicators of financial globalization. Copyright The Author 2010. Published by Oxford University Press on behalf of the International Bank for Reconstruction and Development / the world bank . All rights reserved. For permissions, please e-mail: journals.permissions@oxfordjournals.org, Oxford University Press.

This paper conducts the first empirical assessment of theories concerning risk taking by banks, their ownership structures, and national bank regulations. We focus on conflicts between bank managers and owners over risk, and we show that bank risk taking varies positively with the comparative power of shareholders within the corporate governance structure of each bank. Moreover, we show that the relation between bank risk and capital regulations, deposit insurance policies, and restrictions on bank activities depends critically on each bank's ownership structure, such that the actual sign of the marginal effect of regulation on risk varies with ownership concentration. These findings show that the same regulation has different effects on bank risk taking depending on the bank's corporate governance structure.

The operation of the formal financial system is profoundly important for the poor. Financial development influences the degree to which economic opportunities are shaped by talent rather than by parental wealth. Considerably more research is needed on which formal financial sector policies boost aggregate economic efficiency, while simultaneously expanding the economic prospects of the poor.

The bulk of corporate governance theory examines the agency problems that arise from two extreme ownership structures: 100% small shareholders or one large, controlling owner combined with small shareholders. In this paper, we question the empirical validity of this dichotomy. In fact, one-third of publicly listed firms in Europe have multiple large owners, and the market value of firms with multiple blockholders differs from firms with a single large owner and from widely held firms. Moreover, the relationship between corporate valuations and the distribution of cash-flow rights across multiple large owners is consistent with the predictions of recent theoretical models. The Author 2007. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org, Oxford University Press.

Which public policies and ownership structures enhance the governance of banks? The authors construct a new database on the ownership of banks internationally and then assess the ramifications of ownership, shareholder protection laws, and supervisory and regulatory policies on bank valuations. Except in a few countries with very strong shareholder protection laws, banks are not widely held, but rather families or the state tend to control banks. The authors find that: (i) Larger cash flow rights by the controlling owner boosts valuations; (ii) Stronger shareholder protection laws increase valuations; and (iii) Greater cash flow rights mitigate the adverse effects of weak shareholder protection laws on bank valuations. These results are consistent with the views that expropriation of minority shareholders is important internationally, that laws can restrain this expropriation, and concentrated cash flow rights represent an important mechanism for governing banks. Finally, the evidence does not support the view that empowering official supervisory and regulatory agencies will increase the market valuation of banks.

What is the impact of firms that cross-list, issue depositary receipts, or raise capital in international stock markets on the trading activity and liquidity of remaining firms in domestic markets? Using a panel of 3,000 firms from 55 countries during 1989-2000, we find that internationalization reduces the trading activity and liquidity of domestic firms through two channels. First, the trading of international firms migrates from domestic to international markets and this migration along with the reduction in domestic trading of international firms has negative spillover effects on domestic firm trading activity and liquidity. Second, there is trade diversion within domestic markets as trading activity shifts out of domestic firms and into international firms.

How many and which firms issue equity and bonds in domestic and international markets, how do these firms grow relative to non-issuing firms, and how does firm performance vary along the firm size distribution? To evaluate these questions, a new data set is constructed by matching data on firm-level capital raising activity with balance sheet data for 45,527 listed firms in 51 countries. Three main patterns emerge from the analysis. (1) Only a few large firms issue equity or bonds, and among them a small subset has raised a large proportion of the funds raised during the 1990s and 2000s. (2) Issuers grow faster than non-issuers in assets, sales, and employment, that is, firms do not simply use securities markets to adjust their financial accounts. (3) The firm size distribution of issuers evolves differently from that of non-issuers, tightening among issuers and widening among non-issuers.