Skip navigation
Please use this identifier to cite or link to this item:
Title: Essays in Financial Economics
Authors: Baron, Matthew David
Advisors: Xiong, Wei
Contributors: Economics Department
Keywords: Crash risk
Credit booms
Equity issuance
Financial crises
High frequency trading
Subjects: Economics
Issue Date: 2015
Publisher: Princeton, NJ : Princeton University
Abstract: This dissertation studies the linkages between financial intermediaries and capital markets. In particular, it analyzes potential sources of instability originating from the intermediary sector. Chapter 1, "Countercyclical Bank Equity Issuance," studies capital structure dynamics of intermediaries over the credit cycle. I show that during credit booms, banks raise less equity (i.e. countercyclical equity issuance), even though more equity might help banks better absorb shocks. I argue that government guarantees distort the incentives of banks to raise equity and thus play a crucial role in driving banks' countercyclical equity issuance. My findings help explain why banks may resist raising equity during credit expansions, making financial distress more likely. Chapter 2, "Credit Expansion and Neglected Crash Risk," co-authored with Wei Xiong, studies the role of bank shareholders in credit booms and financial crises. This chapter tests different theories of the causes and consequences of credit expansions through the lens of asset prices and highlights the role of over-optimism and neglect of crash risk by bank shareholders. Chapter 3, "Risk and Return in High Frequency Trading," co-authored with Jonathan Brogaard and Andrei Kirilenko, studies a very different type of financial intermediary, high-frequency traders. Using a new proprietary, firm-level dataset, we show that high-frequency traders have strong incentives to take liquidity in financial markets and compete over small improvements in speed.
Alternate format: The Mudd Manuscript Library retains one bound copy of each dissertation. Search for these copies in the library's main catalog
Type of Material: Academic dissertations (Ph.D.)
Language: en
Appears in Collections:Economics

Files in This Item:
File Description SizeFormat 
Baron_princeton_0181D_11321.pdf6.02 MBAdobe PDFView/Download

Items in Dataspace are protected by copyright, with all rights reserved, unless otherwise indicated.