Optimal banking with delegated monitoring

• 成果类型: Article
• 署名作者: Antic, Nemanja; Hu, Tai-Wei
• 署名单位: Northwestern University; University of Bristol
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2024.105904
• 发表日期: 2024
• 关键词: Banking regulations; costly state verification; Delegated monitoring

摘要

We propose a model of financial intermediation based on delegated monitoring, where firms' returns are private information that lenders can ascertain through costly state verification. Our model has two key features: lenders cannot commit to their verification strategies and there are aggregate shocks. Simple debt contracts are Pareto optimal with or without intermediation. We show that the benefits of intermediation can be limited by financial instability in the presence of aggregate shocks. However, a well-designed resolution mechanism ensures the Pareto optimality of financial intermediation, and a bail-out policy can restore financial stability.