TY  - BOOK
AU  - Gorton,Gary
AU  - Rosen,Richard
ED  - National Bureau of Economic Research.
TI  - Corporate Control, Portfolio Choice, and the Decline of Banking
T2  - NBER working paper series
PY  - 1992///
CY  - Cambridge, Mass.
PB  - National Bureau of Economic Research
N1  - December 1992; Hardcopy version available to institutional subscribers
N2  - In the last two decades U.S. banks have become systematically less profitable and riskier as nonbank competition has eroded the profitability of banks' traditional activities. Bank failures, insignificant from 1934, the date the Glass-Steagall Act was passed, until 1980, rose exponentially in the 1980s. The leading explanation for the persistence of these trends centers on fixed-rate deposit insurance: the insurance gives bank shareholders an incentive to take on risk when the value of bank charters falls. We propose and test an alternative explanation based on corporate control considerations. We show that managerial entrenchment, more than moral hazard associated with deposit insurance, explains the recent behavior of the banking industry
UR  - https://www.nber.org/papers/w4247
UR  - http://dx.doi.org/10.3386/w4247
ER  -