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Reputation acquisition in imperfect financial markets

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  • Asano, Koji

Abstract

This paper incorporates financial market imperfections into the Diamond (1989) model where reputation concerns limit managers’ excessive risk-taking. We show that the reputational discipline collapses because of an increase in pledgeability and a decline in interest rates over time.

Suggested Citation

  • Asano, Koji, 2016. "Reputation acquisition in imperfect financial markets," Economics Letters, Elsevier, vol. 139(C), pages 76-78.
    • Handle: RePEc:eee:ecolet:v:139:y:2016:i:c:p:76-78
    DOI: 10.1016/j.econlet.2016.01.001
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    References listed on IDEAS

    as
    1. Bengt Holmstrom & Jean Tirole, 1997. "Financial Intermediation, Loanable Funds, and The Real Sector," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(3), pages 663-691.
    2. Veronica Guerrieri & Peter Kondor, 2012. "Fund Managers, Career Concerns, and Asset Price Volatility," American Economic Review, American Economic Association, vol. 102(5), pages 1986-2017, August.
    3. Raghuram G. Rajan, 2006. "Has Finance Made the World Riskier?," European Financial Management, European Financial Management Association, vol. 12(4), pages 499-533, September.
    4. Holmström, Bengt, 2013. "Inside and Outside Liquidity," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262518536, December.
    5. Diamond, Douglas W, 1989. "Reputation Acquisition in Debt Markets," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 828-862, August.
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    More about this item

    Keywords

    Reputation; Risk-taking; Pledgeability; Low interest rates;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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