Three essays in financial economics: feedback mechanisms in financial markets and agency problems

Abstract

Crises have been a feature of the financial landscape for centuries. While the three essays in this dissertation have the common theme of financial crises & regulation, each focuses on different aspects revolving around this topic. One of the key elements that enable us to better understand systemic risk, namely the financial positive feedback mechanisms, is investigated thoroughly in the first essay. Particularly, a novel information-based amplification mechanism pushing the asset prices away from the fundamentals and keeping them there is described in depth. Also, policy issues in terms of regulatory transparency are discussed. The second essay analyzes strategic behavior, agency conflicts and optimal contract design in the context of corporate decision-making under uncertainty and flexibility. Finally, the third essay documents the determinants of bank lobbying before and during the 2007-2009 financial crisis; it investigates also the impact of the announcement of the Dodd-Frank bill and of the Volcker rule on banks' lobbying activities.