Date of Award
Doctor of Philosophy
This thesis is a collection of four essays in financial economics.;The first essay develops an information-based banking model to examine the choice by lenders between negotiated debt transactions and open-market transactions when the loan market is subject to adverse selection. Due to the borrowers' reputation generated through repeated financial transactions, the model exhibits dynamics of adverse selection, which, in turn, induces the movement towards securitization. The paper also studies how altering the information structure between banks and borrowers affects the dynamics of bank-loan relationships and lending rates.;The second essay applies a version of the information-based banking model developed in the first essay to examine the role of financial deepening in the context of a dynamic model. In the essay, financial deepening is interpreted in two ways: (1) a decrease in the resources spent on negotiation over terms of financial transactions, and (2) the evolution of credit markets from those with substantial degree of adverse selection to those with no adverse selection. The effect of those changes on the rate of growth is studied. It is also shown that some economic policies which affect the bargaining position of the bank may enhance the growth rate.;The third essay attempts to show that the existence of a loan sales market enables the deposit insurance corporation to implement risk-adjusted insurance premiums to banks. In the essay, the exact riskiness of the banks is private information which cannot be observed by the deposit insurance corporation. It is shown that the advent of a loan sales market induces the banks to voluntarily reveal their riskiness, and, hence, resolves the adverse selection problem between the deposit insurance corporation and banks.;The fourth essay develops a life-cycle model of corporate finance where a variety of ages of borrowers coexist to show that higher default rates in financial markets need not be associated with lower social welfare measured by the level of production by the lenders and the borrowers. The essay demonstrates that, when the brokerage fee charged by securities companies decreases, the default rate in the bond market as well as the one among the borrowers who raise funds through banks rises while the social welfare increases.
Konishi, Masaru, "Essays On Financial Economics" (1994). Digitized Theses. 2324.