Hamid Mehran served as a staff economist in the Research & Statistics Group of the Federal Reserve Bank of New York. Dr. Mehran has taught at Carroll School of Management at Boston College, Columbia Business School, the Kellogg Graduate School of Management at Northwestern University, MIT Sloan School of Management, and the Wharton School of the University of Pennsylvania. He was a research associate at Hewitt Associates and a fellow of the Wharton Financial Institutions Center. His research interest is in corporate finance. He has written widely on the governance of banks and served as guest editor of the Journal of Financial Intermediation special issue “Corporate Governance in the Banking and the Financial Services Industries.” He also edited two special issues of Economic Policy Review: “Corporate Governance: What Do We Know, and What Is Different about Banks?” and “Behavioral Risk Management in the Financial Services Industry: The Role of Culture, Governance, and Financial Reporting.”
Hamid Mehran discusses proposals for reforming bankers' compensation to better align incentives and risk-taking. Mehran contends market-based, self-regulating compensation structures would enhance governance and financial stability more effectively than punitive bonus caps or clawbacks imposed by regulators.
Capital markets are central to capitalism and the functioning of the US economy. Yet, short-selling, an integral part of price discovery in capital markets, has been blamed as a contributor to the recent banking crisis. Lawmakers and interest groups have labeled short sellers opportunists who prey on small investors and the public without justification. The authors shed light on this debate and question the merit of the allegations.
To what degree did banks’ equity price declines trigger deposit withdrawals at recently failed banks? To what degree did the withdrawals trigger declining bank equity prices? Hamid Mehran and Chester Spatt note that in either case, short-selling is not to blame and is, in fact, an essential part of a well-functioning market.
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