#1994-025A "Banking and Deposit Insurance as a Risk-Transfer Mechanism"
by Sangkyun Park


This paper models an economy in which risk-averse savers and risk-neutral entrepreneurs make investment decisions. Aggregate investment in high-yielding risky projects is maximized when risk-neutral agents bear all nondiversifiable risks. More...

#1994-023A "Market Discipline by Depositors: Evidence from Reduced Form Equations"
by Sangkyun Park


This paper examines the effects of the estimated probability of bank failure on the growth rates of large time deposits and interest rates on those deposits. While riskier banks paid higher interest rates, they attracted less large time deposits in the second half of the 1980s. More...

PUBLISHED: Quarterly Review of Economics & Finance, 1995 Special Issue

#1994-005A "The Bank Capital Requirement and Information Asymmetry"
by Sangkyun Park
March 1994

This paper recognizes two main factors that cause the capital requirement to affect the weighted average cost of capital and hence the investment behavior of banks: underpriced debt resulting from the deposit insurance and information asymmetry between managers and the stock market. For a bank enjoying a low cost of debt (deposits), an increased proportion of equity financing raises the weighted average cost of capital. More...