Pub Date : 2026-01-05DOI: 10.1016/j.jbankfin.2025.107617
Koen Inghelbrecht , Mariachiara Tedde
This study investigates the impact of the MiFID-mandated warning signal on curbing excessive trading behavior among investors. According to MiFID regulations, brokers must warn investors when a financial product is deemed inappropriate. Our theoretical model proposes that an effective warning signal can reduce investors demand for risky assets, thereby lowering transaction costs and potentially reducing broker profit. Furthermore, a salient warning signal may improve investors payoffs. Using a regression discontinuity design and a unique brokerage dataset, our empirical analysis confirms these propositions. We find that an effective warning signal is associated with reduced excessive trading, lower transaction costs, and, to some extent, better investor performance. Additionally, we examine the influence of investor overconfidence in financial literacy on the signal effectiveness, finding that overconfidence (partially) counteracts the signal impact.
{"title":"Effectiveness of warning signal and overconfident investors","authors":"Koen Inghelbrecht , Mariachiara Tedde","doi":"10.1016/j.jbankfin.2025.107617","DOIUrl":"10.1016/j.jbankfin.2025.107617","url":null,"abstract":"<div><div>This study investigates the impact of the MiFID-mandated warning signal on curbing excessive trading behavior among investors. According to MiFID regulations, brokers must warn investors when a financial product is deemed inappropriate. Our theoretical model proposes that an effective warning signal can reduce investors demand for risky assets, thereby lowering transaction costs and potentially reducing broker profit. Furthermore, a salient warning signal may improve investors payoffs. Using a regression discontinuity design and a unique brokerage dataset, our empirical analysis confirms these propositions. We find that an effective warning signal is associated with reduced excessive trading, lower transaction costs, and, to some extent, better investor performance. Additionally, we examine the influence of investor overconfidence in financial literacy on the signal effectiveness, finding that overconfidence (partially) counteracts the signal impact.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"184 ","pages":"Article 107617"},"PeriodicalIF":3.8,"publicationDate":"2026-01-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145929229","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-05DOI: 10.1016/j.jbankfin.2025.107616
Sumit Agarwal , Swee Hoon Ang , Yonglin Wang , Jian Zhang
This paper assesses the impact on consumption and debt repayment from a credit card promotional campaign offering cash-back rewards. Using account-level administrative data from a large U.S. financial institution, we employ a generalized difference-in-differences design and find that even with a small 1% cash-back incentive, the rewards program leads to a substantial change in consumer behavior. Cardholders joining the rewards program increase their credit card spending by 32% and their debt by 8%, with such behavior persisting in the long run. Evidence from credit bureau confirms that the higher spending and debt are not driven by cross-card substitution or similar promotions by other card issuers. Different consumer segments respond differentially to the promotional campaign. Consumers with a higher level of liquidity constraints and who are less financially literate demonstrate more pronounced responses.
{"title":"Cash-back rewards: Effects on spending and debt accumulation","authors":"Sumit Agarwal , Swee Hoon Ang , Yonglin Wang , Jian Zhang","doi":"10.1016/j.jbankfin.2025.107616","DOIUrl":"10.1016/j.jbankfin.2025.107616","url":null,"abstract":"<div><div>This paper assesses the impact on consumption and debt repayment from a credit card promotional campaign offering cash-back rewards. Using account-level administrative data from a large U.S. financial institution, we employ a generalized difference-in-differences design and find that even with a small 1% cash-back incentive, the rewards program leads to a substantial change in consumer behavior. Cardholders joining the rewards program increase their credit card spending by 32% and their debt by 8%, with such behavior persisting in the long run. Evidence from credit bureau confirms that the higher spending and debt are not driven by cross-card substitution or similar promotions by other card issuers. Different consumer segments respond differentially to the promotional campaign. Consumers with a higher level of liquidity constraints and who are less financially literate demonstrate more pronounced responses.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"184 ","pages":"Article 107616"},"PeriodicalIF":3.8,"publicationDate":"2026-01-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145929233","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-03DOI: 10.1016/j.jbankfin.2025.107614
Corrado Botta , Roy Cerqueti , Roberto Savona
We study the effects of alternative price-cap mechanisms applied to the European gas market on price and volatility dynamics. Within a multivariate framework with dynamic correlations, we simulate counterfactual policy regimes and trace their spillovers to energy, agricultural, metal, and equity markets. We focus on the European natural gas market from January 2013 to October 2023. The results show the following. First, a cap rule based on a fixed price mechanism consistently lowers energy prices, even if volatility can be high. Second, the gas price cap measure adopted by the European Commission and currently enforced is more conservative in terms of the probability of activation. Third, a mechanism directly related to gas price volatility performs better in containing energy prices and taming volatility spillover effects in commodity and equity markets.
{"title":"Gas price caps and volatility transmission in commodity and equity markets","authors":"Corrado Botta , Roy Cerqueti , Roberto Savona","doi":"10.1016/j.jbankfin.2025.107614","DOIUrl":"10.1016/j.jbankfin.2025.107614","url":null,"abstract":"<div><div>We study the effects of alternative price-cap mechanisms applied to the European gas market on price and volatility dynamics. Within a multivariate framework with dynamic correlations, we simulate counterfactual policy regimes and trace their spillovers to energy, agricultural, metal, and equity markets. We focus on the European natural gas market from January 2013 to October 2023. The results show the following. First, a cap rule based on a fixed price mechanism consistently lowers energy prices, even if volatility can be high. Second, the gas price cap measure adopted by the European Commission and currently enforced is more conservative in terms of the probability of activation. Third, a mechanism directly related to gas price volatility performs better in containing energy prices and taming volatility spillover effects in commodity and equity markets.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"184 ","pages":"Article 107614"},"PeriodicalIF":3.8,"publicationDate":"2026-01-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145979529","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-02DOI: 10.1016/j.jbankfin.2025.107622
David A. Lesmond , Xuhui (Nick) Pan
We establish the bid–ask spread bias embedded in the Campbell et al. (2001; 2022) (CLMX) estimate of idiosyncratic variance (IV). Minimizing the bid–ask spread effect by using quote midpoints or increasing the return horizon eliminates the upward (CLMX) and downward time trend (Bekaert et al., 2012) in IV. Five natural experiments illustrate that an exogenous shock in the recording of transaction prices significantly affects the resulting time trend in IV. Cross-sectional and time-series regressions show that the bid–ask spread subsumes the CLMX IV time trend.
我们在Campbell et al. (2001; 2022) （CLMX）对特质方差（IV）的估计中建立了买卖价差偏差。通过使用报价中点或增加收益水平来最小化买卖价差效应，消除了IV中的向上（CLMX）和向下的时间趋势（Bekaert et al., 2012）。五个自然实验表明，交易价格记录中的外生冲击显著影响IV中产生的时间趋势。横截面回归和时间序列回归表明，买卖价差包含CLMX IV时间趋势。
{"title":"Can the bid–ask spread explain the trend in aggregate idiosyncratic variance?","authors":"David A. Lesmond , Xuhui (Nick) Pan","doi":"10.1016/j.jbankfin.2025.107622","DOIUrl":"10.1016/j.jbankfin.2025.107622","url":null,"abstract":"<div><div>We establish the bid–ask spread bias embedded in the Campbell et al. (2001; 2022) (CLMX) estimate of idiosyncratic variance (IV). Minimizing the bid–ask spread effect by using quote midpoints or increasing the return horizon eliminates the upward (CLMX) and downward time trend (Bekaert et al., 2012) in IV. Five natural experiments illustrate that an exogenous shock in the recording of transaction prices significantly affects the resulting time trend in IV. Cross-sectional and time-series regressions show that the bid–ask spread subsumes the CLMX IV time trend.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"184 ","pages":"Article 107622"},"PeriodicalIF":3.8,"publicationDate":"2026-01-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145979530","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-30DOI: 10.1016/j.jbankfin.2025.107625
Mariem Khalifa , Mehdi Khedmati , Mohammed Aminu Sualihu , Alfred Yawson
We examine the impact of CEOs’ public charity affiliations on corporate labor violations and find that public-charity-affiliated CEOs have a lower likelihood of engaging in labor violations than their non-affiliated peers. In a disaggregated analysis, we find the result to be driven primarily by wage and hour violations. This finding is validated when we compare changes in wage and hour violations around different types of CEO turnover. We further identify the promotion of a positive corporate culture and an increase in labor-related expenditures as the main channels through which CEOs’ public charity affiliations affect wage and hour violations. In addition, we find that firms led by public-charity-affiliated CEOs experience lower employee turnover. The impact of public-charity-affiliated CEOs on reducing the likelihood of wage and hour violations is persistent and is more pronounced for CEOs who exhibit more altruistic behavior prior to assuming office. Overall, we provide persuasive evidence that CEOs’ public charity affiliations are beneficial to firms.
{"title":"Corporate labor violations: Do CEOs’ public charity affiliations matter?","authors":"Mariem Khalifa , Mehdi Khedmati , Mohammed Aminu Sualihu , Alfred Yawson","doi":"10.1016/j.jbankfin.2025.107625","DOIUrl":"10.1016/j.jbankfin.2025.107625","url":null,"abstract":"<div><div>We examine the impact of CEOs’ public charity affiliations on corporate labor violations and find that public-charity-affiliated CEOs have a lower likelihood of engaging in labor violations than their non-affiliated peers. In a disaggregated analysis, we find the result to be driven primarily by wage and hour violations. This finding is validated when we compare changes in wage and hour violations around different types of CEO turnover. We further identify the promotion of a positive corporate culture and an increase in labor-related expenditures as the main channels through which CEOs’ public charity affiliations affect wage and hour violations. In addition, we find that firms led by public-charity-affiliated CEOs experience lower employee turnover. The impact of public-charity-affiliated CEOs on reducing the likelihood of wage and hour violations is persistent and is more pronounced for CEOs who exhibit more altruistic behavior prior to assuming office. Overall, we provide persuasive evidence that CEOs’ public charity affiliations are beneficial to firms.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"184 ","pages":"Article 107625"},"PeriodicalIF":3.8,"publicationDate":"2025-12-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145929231","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-29DOI: 10.1016/j.jbankfin.2025.107623
Junru Zhang , Le Luo , Joey Wenling Yang
Despite the growing integration of artificial intelligence (AI) into business models, studies of its impact on corporate climate change exposure remain scarce. Through an examination of AI-related innovations among US-listed firms from 2001 to 2019, we present compelling evidence that AI innovation effectively mitigates firms’ climate change exposure. In particular, it reduces firms’ exposure to regulatory and physical risks related to climate change through improved carbon management efficiency, with computer vision and control and planning being the most effective types in this context. Our findings are particularly pronounced for mature firms and those facing greater regulatory intervention. The results withstand rigorous tests that address endogeneity concerns. Our study provides strong support for firms to adopt AI innovations to achieve carbon neutrality, contributing to the ongoing discourse regarding AI trade-offs. Our findings also offer valuable insights into the development of climate risk mitigation strategies.
{"title":"Does artificial intelligence mitigate climate change exposure?","authors":"Junru Zhang , Le Luo , Joey Wenling Yang","doi":"10.1016/j.jbankfin.2025.107623","DOIUrl":"10.1016/j.jbankfin.2025.107623","url":null,"abstract":"<div><div>Despite the growing integration of artificial intelligence (AI) into business models, studies of its impact on corporate climate change exposure remain scarce. Through an examination of AI-related innovations among US-listed firms from 2001 to 2019, we present compelling evidence that AI innovation effectively mitigates firms’ climate change exposure. In particular, it reduces firms’ exposure to regulatory and physical risks related to climate change through improved carbon management efficiency, with computer vision and control and planning being the most effective types in this context. Our findings are particularly pronounced for mature firms and those facing greater regulatory intervention. The results withstand rigorous tests that address endogeneity concerns. Our study provides strong support for firms to adopt AI innovations to achieve carbon neutrality, contributing to the ongoing discourse regarding AI trade-offs. Our findings also offer valuable insights into the development of climate risk mitigation strategies.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"183 ","pages":"Article 107623"},"PeriodicalIF":3.8,"publicationDate":"2025-12-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145885271","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-28DOI: 10.1016/j.jbankfin.2025.107620
Kebin Deng , Zhong Ding , Xu Liu
This paper proposes a clan-based investment hypothesis regarding household stock investment, specifically emphasizing the role of Confucian clan culture in deterring both the probability of stock investment participation and the stock investment ratio in China. Our findings reveal that households strongly influenced by Confucian clan culture are 17.6 % less likely to participate in stock investment and exhibit an 11.8 % lower ratio of stock investment to bank deposits, compared to other households. Moreover, we document that households dominated by Confucian clan culture are more likely to receive informal financial support for real estate investment, further reducing their participation in the stock market. These results suggest that clan-based investment opportunities play a significant role in discouraging household participation in stock investment.
{"title":"The clan-based investment hypothesis in household stock investment","authors":"Kebin Deng , Zhong Ding , Xu Liu","doi":"10.1016/j.jbankfin.2025.107620","DOIUrl":"10.1016/j.jbankfin.2025.107620","url":null,"abstract":"<div><div>This paper proposes a clan-based investment hypothesis regarding household stock investment, specifically emphasizing the role of Confucian clan culture in deterring both the probability of stock investment participation and the stock investment ratio in China. Our findings reveal that households strongly influenced by Confucian clan culture are 17.6 % less likely to participate in stock investment and exhibit an 11.8 % lower ratio of stock investment to bank deposits, compared to other households. Moreover, we document that households dominated by Confucian clan culture are more likely to receive informal financial support for real estate investment, further reducing their participation in the stock market. These results suggest that clan-based investment opportunities play a significant role in discouraging household participation in stock investment.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"183 ","pages":"Article 107620"},"PeriodicalIF":3.8,"publicationDate":"2025-12-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145927030","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-27DOI: 10.1016/j.jbankfin.2025.107618
Siyi He , Ceng Zeng
We provide firm-level evidence that reduced availability of shadow banking financing affects firms’ employment decisions. Using China’s 2017 shadow banking regulations as an exogenous shock to constrain the availability of shadow banking, we find that the employment level and the ratio of highly skilled employees in affected firms significantly decrease after the regulations are instituted. The plausible underlying channels are intensification of financial constraints and reduction of R&D investment. The effects are more pronounced for non-state-owned enterprises, labor-intensive firms, and firms in provinces that are more dependent on shadow banking. Furthermore, affected firms strategically adopt outsourcing of their human resources, but the firms’ employment changes still harm their financial performance and total factor productivity.
{"title":"The effects of reduced availability of shadow banking financing: Evidence from employment","authors":"Siyi He , Ceng Zeng","doi":"10.1016/j.jbankfin.2025.107618","DOIUrl":"10.1016/j.jbankfin.2025.107618","url":null,"abstract":"<div><div>We provide firm-level evidence that reduced availability of shadow banking financing affects firms’ employment decisions. Using China’s 2017 shadow banking regulations as an exogenous shock to constrain the availability of shadow banking, we find that the employment level and the ratio of highly skilled employees in affected firms significantly decrease after the regulations are instituted. The plausible underlying channels are intensification of financial constraints and reduction of R&D investment. The effects are more pronounced for non-state-owned enterprises, labor-intensive firms, and firms in provinces that are more dependent on shadow banking. Furthermore, affected firms strategically adopt outsourcing of their human resources, but the firms’ employment changes still harm their financial performance and total factor productivity.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"183 ","pages":"Article 107618"},"PeriodicalIF":3.8,"publicationDate":"2025-12-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145885272","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-27DOI: 10.1016/j.jbankfin.2025.107619
Vanya Horneff , David Love , Raimond Maurer
We examine the welfare costs of using common rules of thumb for saving, investing, 401k contributions, and withdrawals in a realistic environment with taxes, Social Security, 401k plan details, and uncertainty in income, lifespan, and returns. We assess common heuristics such as allocating 100 minus age to stocks, contributing 6–10% of income to a 401k, and withdrawing only the required minimum distribution (RMD) in retirement. Target-date rules lead to moderate welfare losses, with one-time compensating variations ranging from $59–$2514 for 401k allocation and $66–$873 for other savings. Contribution rules cause smaller losses ($22–$772), reflecting the importance of the 401k matching incentives. Withdrawing only the RMD leads to substantial welfare losses, ranging between $1321–$9919 from the perspective of a 66-year-old. But a hybrid rule—taking the maximum of a fixed percentage and the RMD—generates welfare losses about half as large as those associated with the RMD rule. We also compare these rules to more clearly suboptimal behaviors, such as avoiding the stock market, delaying saving, or contributing below the matching threshold. In these cases, rules of thumb look far more attractive, often avoiding substantial welfare losses. Overall, we find mixed support for the effectiveness of rules of thumb. While the welfare losses associated with such rules are modest, there may be substantial benefits to more detailed financial planning.
{"title":"Rules of thumb and retirement accounts","authors":"Vanya Horneff , David Love , Raimond Maurer","doi":"10.1016/j.jbankfin.2025.107619","DOIUrl":"10.1016/j.jbankfin.2025.107619","url":null,"abstract":"<div><div>We examine the welfare costs of using common rules of thumb for saving, investing, 401k contributions, and withdrawals in a realistic environment with taxes, Social Security, 401k plan details, and uncertainty in income, lifespan, and returns. We assess common heuristics such as allocating 100 minus age to stocks, contributing 6–10% of income to a 401k, and withdrawing only the required minimum distribution (RMD) in retirement. Target-date rules lead to moderate welfare losses, with one-time compensating variations ranging from $59–$2514 for 401k allocation and $66–$873 for other savings. Contribution rules cause smaller losses ($22–$772), reflecting the importance of the 401k matching incentives. Withdrawing only the RMD leads to substantial welfare losses, ranging between $1321–$9919 from the perspective of a 66-year-old. But a hybrid rule—taking the maximum of a fixed percentage and the RMD—generates welfare losses about half as large as those associated with the RMD rule. We also compare these rules to more clearly suboptimal behaviors, such as avoiding the stock market, delaying saving, or contributing below the matching threshold. In these cases, rules of thumb look far more attractive, often avoiding substantial welfare losses. Overall, we find mixed support for the effectiveness of rules of thumb. While the welfare losses associated with such rules are modest, there may be substantial benefits to more detailed financial planning.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"183 ","pages":"Article 107619"},"PeriodicalIF":3.8,"publicationDate":"2025-12-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145885274","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-26DOI: 10.1016/j.jbankfin.2025.107615
Caio Machado , Ana Elisa Pereira
This paper analyzes the role of guarantees when a policymaker wants to avoid a credit crunch, but at the same time is concerned that its policies may lead to excessive risk taking. Banks face a coordination problem in their investment decisions and are allowed to risk-shift to projects with smaller expected return and higher volatility. Government guarantees can avoid a freeze in funding at the cost of increasing risk-shifting behavior. When fundamentals are sufficiently low, the policymaker prefers not to intervene and a credit crunch happens. The moral hazard problem makes guarantees more powerful, reducing the amount of guarantees needed to avoid a coordination failure.
{"title":"Guarantees, risk shifting and credit crunches","authors":"Caio Machado , Ana Elisa Pereira","doi":"10.1016/j.jbankfin.2025.107615","DOIUrl":"10.1016/j.jbankfin.2025.107615","url":null,"abstract":"<div><div>This paper analyzes the role of guarantees when a policymaker wants to avoid a credit crunch, but at the same time is concerned that its policies may lead to excessive risk taking. Banks face a coordination problem in their investment decisions and are allowed to risk-shift to projects with smaller expected return and higher volatility. Government guarantees can avoid a freeze in funding at the cost of increasing risk-shifting behavior. When fundamentals are sufficiently low, the policymaker prefers not to intervene and a credit crunch happens. The moral hazard problem makes guarantees more powerful, reducing the amount of guarantees needed to avoid a coordination failure.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"184 ","pages":"Article 107615"},"PeriodicalIF":3.8,"publicationDate":"2025-12-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145929232","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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