The increased fragility of the banking industry has generated growing concern about the risks associated with payment systems. Although in most industrial countries different interbank payment systems coexist, little is really known about their properties in terms of risk and efficiency. How should payment systems be designed? We tackle this question by comparing the two main types of payment systems, gross and net, in a framework where uncertainty arises from several sources: the time of consumption, the location of consumption, and the return on investment. Payments across locations can be made either by directly transferring liquidity or by transferring claims against the bank in the other location. The two mechanisms are interpreted as the gross and net settlement systems in interbank payments. We characterize the equilibria in the two systems and identify the trade-off in terms of safety and efficiency.Journal of Economic LiteratureClassification Numbers: G21, E51.

If controlling shareholders can divert profits, equity ownership is more concentrated the higher the stock returns correlation. A higher returns correlation reduces the benefits of diversification, giving rise to both a higher investment by the controlling shareholder in the asset that he controls and a lower investment by the non-controlling shareholders. The empirical analysis supports the predictions of the model: equity ownership is more concentrated in countries where the stock returns correlation is higher; moreover the intensity of the relationship between the stock returns correlation and ownership concentration is amplified by poor investor protection.

We investigate CEO turnover in relationship to performance, ownership concentration and CEO ownership in a sample of 60 private companies listed on the Italian Stock Exchanges over the 9-year period 1988–1996. Concentrated ownership, family control, limited institutional investors activism, and lack of main bank monitoring make Italy a corporate governance environment dominated by insiders. As a result, boards of directors are dominated by insiders and/or represent the interests of the controlling shareholders. Our main finding is that CEO turnover is negatively related to firm performance also in this environment, but this relationship holds only if the controlling shareholder is not the CEO. Our findings suggest that insiders with large stakes monitor and replace under-performing outside CEOs. The paper offers positive empirical evidence that non-CEO controlling shareholders are a governance mechanism that provides a substitute for outside members on boards of directors in lowering agency costs. When the CEO is an owner, however, we have all the negative aspects of insider-dominated boards.

The paper studies the effectiveness of bank resolutions using a comprehensive database on banks headquartered in 18 European countries over the period 2000–19. By means of difference-in-differences methodology, we find that impaired asset segregations – otherwise known as bad banks – have been more effective than state-funded recapitalisations of distressed banks. While recapitalised banks seem to have used the injected funds mainly to clean up their balance sheets by reducing problem loans and cutting down on lending, banks that segregated assets increased progressively their lending after the creation of the bad bank. For both types of banking crisis interventions, we find a significant ex-post reduction in the cost of bank funding and shift towards deposit funding.