Rollover risk as market discipline: A two-sided inefficiency
| Autor: | Thomas M. Eisenbach |
|---|---|
| Rok vydání: | 2017 |
| Předmět: |
Economics and Econometrics
General equilibrium theory Financial economics Strategy and Management Financial intermediary Monetary economics jel:G01 Market discipline jel:G24 jel:G21 Intermediary Accounting 0502 economics and business Systematic risk Economics Asset (economics) 050207 economics Global game 050208 finance Rollover (finance) rollover risk market discipline fire sales global games 05 social sciences jel:C73 Bank run jel:D53 jel:G32 Inefficiency Finance |
| Zdroj: | Journal of Financial Economics. 126:252-269 |
| ISSN: | 0304-405X |
| DOI: | 10.1016/j.jfineco.2017.07.009 |
| Popis: | Why does the market discipline that financial intermediaries face seem too weak during booms and too strong during crises? This paper shows in a general equilibrium setting that rollover risk as a disciplining device is effective only if all intermediaries face purely idiosyncratic risk. However, if assets are correlated, a two-sided inefficiency arises: Good aggregate states have intermediaries taking excessive risks, while bad aggregate states suffer from costly fire sales. The driving force behind this inefficiency is an amplifying feedback loop between asset values and market discipline. In equilibrium, financial intermediaries inefficiently amplify both positive and negative aggregate shocks. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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