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A Contracting-Theory Interpretation of the Origins of Federal Deposit Insurance / Edward J. Kane, Berry K. Wilson.
- Format:
- Book
- Author/Creator:
- Kane, Edward J.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w6451.
- NBER working paper series no. w6451
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1998.
- Summary:
- Conventional wisdom holds that the enactment of federal deposit insurance helped small rural banks at the expense of large urban institutions. This paper uses asymmetric information, agency-cost paradigms from corporate finance theory and data on bank stock prices to show how deposit insurance could and did help stockholders of large banks. The broadening stockholder distribution of large banks during the stock market bubble of the late 1920s undermined the efficiency of double liability provisions in controlling incentive conflict among large bank stakeholders. Federal deposit insurance restored depositor confidence by asking government officials to take over and bond the task of monitoring managerial performance and solvency at U.S. banks.
- Notes:
- Print version record
- March 1998.
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