Disclosure, liquidity, and the cost of capital

Article Abstract:

This paper shows that revealing public information to reduce information asymmetry can reduce a firm's cost of capital by attracting increased demand from large investors due to increased liquidity of its securities. Large firms will disclose more information since they benefit most. Disclosure also reduces the risk bearing capacity available through market makers. If initial information asymmetry is large, reducing it will increase the current price of the security. However, the maximum current price occurs with some asymmetry of information: further reduction of information asymmetry accentuates the undesirable effects of exit from market making. (Reprinted by permission of the publisher.)

Capital investments, Disclosure (Securities law), Market makers (Securities trading)

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A theory of bank capital

Article Abstract:

A theory of bank capital is presented, focusing on a model that sets up a relationship between assets and liabilities, and identifies financial areas affected by bank capital, such as safety, refinancing ability, and relationship to borrowers. Topics include liquidity, single and multi-period projects, and implications of minimum capital requirements.

United States, Financial Services, Finance and Insurance, Legislative Bodies, Finance, Beliefs, opinions and attitudes, Bank capital

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Liquidity shortages and banking crises

Article Abstract:

A study is made on bank failures, which can infect the processes of other banks.

Bank failures

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