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Jel Classification:G34 

Journal Article
The Blockchain Revolution: Decoding Digital Currencies

Cryptocurrencies and decentralized finance have grown considerably since the publication of the white paper on bitcoin in 2009. This article presents an overview of cryptocurrencies, blockchain technology, and their applications, explaining the spirit of the enterprise and how it compares with traditional operations. We discuss money, digital money, and payments; cryptocurrencies, blockchain, and the double-spending problem of digital money; decentralized finance; and central bank digital currency.
Review , Volume 104 , Issue 3 , Pages 149-165

Journal Article
Trends in home purchase lending: consolidation and the Community Reinvestment Act

Consolidation among banking institutions has substantially changed the structure of the banking industry. Between 1975 and 1997, the number of commercial banks and savings associations declined more than 40 percent. Over the same broad period, the market for home mortgage lending has also changed substantially. Notably, home mortgage lending is no longer primarily the province of banking institutions operating in the communities in which they have banking offices. In recent decades, mortgage and finance companies and banking organizations operating outside their local communities have gained ...
Federal Reserve Bulletin , Volume 85 , Issue Feb

Working Paper
EBITDA Add-backs in Debt Contracting: A Step Too Far?

Financial covenants in syndicated loan agreements often rely on definitions of EBITDA that deviate from the GAAP definition. We document the increased usage of non-GAAP addbacks toEBITDA in recent times. Using the 2013 Interagency Guidance on Leveraged Lending, which we argue led to an exogenous increase in non-GAAP EBITDA addbacks, we show that these addbacksincrease the likelihood of loan delinquency and default, and also increase the likelihood of the borrower experiencing a ratings downgrade. Greater use of non-GAAP EBITDA addbacks also makes it more likely that lead arrangers lower their ...
Working Papers , Paper 2022-029

Working Paper
Why does the FDIC sue?

Cases the Federal Deposit Insurance Corporation (FDIC) pursues against the directors and officers of failed commercial banks for (gross) negligence are important for the corporate governance of U.S. commercial banks. These cases shape the kernel of bank corporate governance, as they guide expectations of bankers and regulators in defining the limits of acceptable behavior under financial distress. We examine the differences in behavior of all 408 U.S. commercial banks that were taken into receivership between 2007?2012. Sued banks had different balance sheet dynamics in the three years prior ...
Working Papers , Paper 1601

Working Paper
Information Production, Misconduct Effort, and the Duration of Financial Misrepresentation

We examine the link between information produced by auditors and analysts and fraud duration. Using a hazard model, we analyze misstatement periods related to SEC accounting and auditing enforcement releases (AAERs) between 1982 and 2012. Results suggest that misconduct is more likely to end just after firms announce an auditor switch or issue audited financial statements, particularly when the audit report contains explanatory language. Analyst following increases the fraud termination hazard. However, increases (decreases) in analyst coverage have a negative (positive) marginal impact on ...
Working Papers , Paper 16-13R

Working Paper
The Impact of Reserves Practices on Bank Opacity

Using a banking firm?s unexpected loan loss provision to proxy for earnings management, it is found to have a significantly positive effect on bank opacity. The explanatory power of earnings management on bank opacity is stronger during the pre-crisis period than during the 2007-2009 financial crisis. When we examine the effects of delays in loan loss recognition on bank opacity, we found strong statistical relations during the financial crisis period, while the results for the pre-crisis period are mixed. We conclude that bank opacity is related to unexpected loan loss provision as well as ...
Working Paper Series , Paper 2013-35

Journal Article
The Future of Money and Its Implications for Society, Central Banks, and the International Monetary System

This new wave of financial innovations has broad implications for society, banking, and central banking: Digital platforms can ease entry for financial services providers, increase transactional efficiency, and widen access to and participation in the financial system. They could also decrease the use of cash and alter the U.S. dollar's role as today's vehicle currency.
Review , Volume 105 , Issue 1 , Pages 1-8

Working Paper
Risk Choices and Compensation Design

We analyze the impact of bad-tail risks on managerial pay functions, especially the decision to pay managers in stock or in options. In contrast to conventional wisdom, we find that options are often a superior vehicle for limiting managerial incentives to take bad-tail risks while providing incentives to exert effort. Arrangements similar to collar options are able to incent the desired project choice in wider range of circumstances than call options or stock. However, information requirements appear high. We briefly explore alternatives with features similar to maluses and clawbacks, which ...
International Finance Discussion Papers , Paper 1130

Journal Article
Capital Reallocation and Capital Investment

Corporate debt levels have grown substantially during the 10-year recovery from the global financial crisis. This debt might be expected to finance investments that support firm expansion, as the U.S. economy has experienced strong growth over the last 10 years. However, much of the corporate debt has been used to reallocate capital through mergers and acquisitions rather than to fund investment activity. Perhaps as a result, some market watchers have expressed concerns that corporations are crowding out, rather than complementing, new investment. {{p}} David Rodziewicz and Nicholas Sly show ...
Economic Review , Issue Q II , Pages 33-52

Working Paper
Causal Impact of Risk Oversight Functions on Bank Risk: Evidence from a Natural Experiment

Our goal is to document the causal impact of having a board-level risk committee (RC) and a management-level executive designated as chief risk officer (CRO) on bank risk. The Dodd Frank Act requires bank holding companies with over $10 billion of assets to have an RC, while those with over $50 billion of assets are additionally required to have a CRO to oversee risk management. The innovation that allows us to document a causal impact is our research design. First, we use the passage of the Dodd Frank Act as a natural experiment that forced noncompliant firms to adopt an RC and appoint a ...
Working Papers , Paper 19-01

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