Daniel M. Covitz

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We investigate how banking market competition, informational opacity, and sensitivity to shocks have changed over the last three decades by examining the persistence of ®rm-level rents. We develop propagation mechanisms with testable implications to isolate the sources of persistence. Our analysis suggests that di€erent processes underlie persistence at the(More)
This paper presents the first comprehensive test of whether well-known conflicts of interest at bond rating agencies importantly influence their actions. This hypothesis is tested against the alternative that rating agency actions are primarily influenced by a countervailing incentive to protect their reputations as delegated monitors. These two hypotheses(More)
and seminar participants at the Federal Reserve Board for their helpful comments. Daniel Rawner provided excellent research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the Federal Reserve Board, its staff, or the Federal Reserve System. Abstract A frictionless, structural view of default has(More)
Researchers, market participants and bank supervisors use the risk sensitivity of a banking organization’s subordinated debt yield spreads in the secondary market as a barometer both of the organization’s health and of the potential for the market to discipline the firm’s behavior. This paper shows that this gauge may understate the potential for market(More)
We model the relationship between market power and both loan interest rates and bank risk without placing strong restrictions on the moral hazard problems between borrowers and banks, and between banks and a government guarantor. Our results suggest that these relationships hinge on intuitive parameterizations of the overlapping moral hazard problems.(More)
This paper develops and tests a recursive model of debt issuance and rating migration. We examine a signaling game with firms that have private information about their probability distribution of future rating migration. A key assumption of the model is that rating agencies reveal information over time, creating a recursive information problem, which in(More)
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