search query: @author Park, S. / total: 23
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| Author: | Park, S. |
| Title: | Banking and deposit insurance as a risk transfer mechanism |
| Journal: | Journal of Financial Intermediation
1996 : JUL, VOL. 5:3, p. 284-304 |
| Index terms: | FINANCE FINANCIAL INTERMEDIARIES BANKING |
| Language: | eng |
| Abstract: | This paper models an economy in which risk-averse and risk-neutral entrepreneurs make investment decisions. Aggregate investment in high-yielding risky projects is maximized when risk-neutral agents bear all nondiversifiable risks. A role of banks is to assume nondiversifiable risks by pledging their capital in addition to diversifying risks. Banks, however, do not completely eliminate risks when monitoring by depositors is imperfect. Government deposit insurance that uses tax revenue to repay depositors transfers remaining risks to entrepreneurs. |
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