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Abstract:
This paper studies bank failures in 21 emerging market countries in the 1990s. By using a competing risk hazard model for bank survival, we show that a government is less likely to take over or close a failing bank if the banking system is weak. This Too-Many-to-Fail effect is robust to controlling for macroeconomic factors, financial crises, the Too-Big-To-Fail effect, domestic financial development, and concerns due to systemic risk and information spillovers. The paper also shows that the Too-Many-to-Fail effect is stronger for larger banks and when there is a large government budget deficit.

Abstract:
This paper uses the primary market for state bonds to study the role of self-dealing in security underpricing. Self-dealing occurs in this setting when campaign contributions motivate state politicians to accept low government bond prices. There is no underpricing effect from choosing a contributing underwriter through an auction. In the absence of an auction, state bonds are underpriced by over 2% when the politician selects a contributing underwriter. This outcome is linked to political agency, not politician incompetence. The results are robust to controlling for credit risk, elected treasurers, underwriter quality, a prior relationship, liquidity, year, and state effects.

Self-Dealing, Securities Issuance, Underpricing, Corruption, Political Agency

Abstract:
This paper studies large private banks in 21 major emerging markets in the 1990s. It first demonstrates that bank failures are very common in these countries: about 25 percent of these banks failed during the seven-year sample period. The paper also shows that political concerns play a significant role in delaying government interventions to failing banks. Failing banks are much less likely to be taken over by the government or to lose their licenses before elections than after. This result is robust to controlling for macroeconomic and bank-specific factors, a new party in power, early elections, outstanding loans from the IMF, as well as country-specific, time-independent factors. This finding implies that much of the within-country clustering in emerging market bank failures is directly due to political concerns.

Abstract:
This paper studies the dynamic incentives for analysts to make biased earnings forecasts. When potential conflicts of interest exist, analysts increase bias with tenure because of the dynamic tradeoff between accuracy and the potential benefits of bias. The paper’s empirical findings support the model. Moreover, the tenure-bias effect is robust controlling for year, industry, broker, firm and analyst fixed effects. In addition, analysts influence investors through the dynamic incentives to be biased; a zero-investment analyst tenure portfolio earns an average abnormal return of 1.15% per month. This tenure effect on asset prices is pronounced for large stocks and growth stocks.

Analyst Bias, Earnings Forecast Bias, Conflicts of Interest, Career Concerns