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Boriana Yontcheva
This paper presents a dynamic game of strategic delegation between a principal and an agent. The principal can choose between two organizational designs: a traditional hierarchy where she retains authority over the choice of projects to be implemented or a delegation where she allows her agent to select the project. The key objectives of this model are to identify the long-run determinants of the principal’s choice and verify the impact of the authority allocation on the agent’s effort levels and on the principal’s payoffs. We apply the model to the relationships between institutional donors and nongovernmental organizations.
Mr. Tamim Bayoumi and Mr. Ashok Vir Bhatia

banking is diluted—compounded by modern “originate to distribute” practices and the well-documented principal-agent issues that they bring. In this state of the world, the assumption always is that retained earnings will outpace credit losses, a calculus that holds for a finite period. Then comes the crash. Collateral values deflate, delinquencies consume allowances, capital fills the shortfall and, finally, capital itself falls short. 24. Bonds included . As we turn our attention to the stock and rate of growth of nonfinancial private sector debt, we find ourselves

International Monetary Fund

, shares or debt obligations of other cooperatives, and long-term securities or obligations. Investments in nonfinancial businesses or assets are typically prohibited. 7. The governance structure of CUs reflects the not-for-profit and member-driven nature of their cooperative structures . CUs do not have external shareholders and the principal-agent issues are less important than those arising from corporate structures. CU members elect a volunteer board of directors from their membership. Typically, the directors do not receive remunerations for their services. Each

International Monetary Fund. European Dept.

( Altstadsaeter et al, 2014 ), Sweden ( Jacob and Alstadsaeter, 2013 ), while the more general view that principal-agent issues play an important role in corporate responses to taxation has also been documented for the US ( Chetty and Saez, 2005 , 2006 ). 13 The empirical framework underlying the wealth/income profiles estimates is summarized in the Appendix. Appendix I. Additional Table and Figures Table A1. The Distribution of LBT Rates, 2018 Federal State # Municipalities Average Min Max Baden-Württemberg 1,101 12

Mr. Tamim Bayoumi and Mr. Ashok Vir Bhatia
This paper questions the view that leverage should have forewarned us of the global financial crisis of 2007-09, pointing to several gearing indicators that were neither useful portents of the onset of the crisis nor of its ferocity. Instead it shows, first, that the use of ill-suited collateral in the secured funding operations of U.S.-based investment banks was the fatal link between the collapse of structured finance and the global malfunction of funding markets that turbocharged the downdraft; and, second, that this insight (and others) can be decrypted from the Flow of Funds Accounts of the United States.
John Nellis

efficiency, and in line with modern amendments to neoclassical theory, he believes that government owners are likely to mismanage principal-agent issues more than private owners. He nonetheless preaches caution: In a competitive market “there exist mechanisms that could enable a public enterprise to operate as efficiently … as its private cousins. But if a market is monopolized, privatization by itself will not guarantee efficiency” ( Tandon, 1995 , p. 32). Tandon’s view is that (1) if government owners enhance competitive forces or use management methods and incentives

International Monetary Fund
This technical note focuses on selected issues on the credit union (CU) sector in the Czech Republic. The business models of CUs in the Czech Republic are fundamentally different from traditional CUs that are typically non-for-profit cooperatives operated for the benefit of a defined set of members. The paper highlights that there is a need to restructure the CU sector, aimed at striking a delicate balance between minimizing financial and supervisory risks arising from the sector while recognizing the social role of prudently managed CUs.
International Monetary Fund. European Dept.
This Selected Issues paper explores wealth inequality and private savings in Germany. Trends in increasing corporate profits and gross savings have widened top income inequality, as corporations are typically owned by households in the top of the wealth distribution. The impact on income inequality is more pronounced in countries where the rise in profitability was a result of lower wage growth and labor income shares to start with, as was the case in Germany. The evidence strongly suggests this is not the case and underscores the important role of German business wealth concentration in this context. As high corporate savings and underlying profits largely reflect capital income accruing to wealthy households and increasingly retained in closely-held firms, the build-up of external imbalance has been accompanied by widening top income inequality, rising private savings and compressed consumption rates. The concentration of privately held and publicly listed firm ownership in the hands of industrial dynasties and institutional investors is especially prevalent in Germany, possibly reflecting distortions in firm entry, financing conditions and tax incentives.
Pietro Dallari, Mr. Nicolas End, Fedor Miryugin, Alexander F. Tieman, and Mr. Seyed Reza Yousefi

) [ θ A t − 1 − r t D t − 1 ] ( 2 ) Investors face an uncertain return on assets. Return is a random variable Θ, about which investors can only conjecture a probability distribution function F(θ) : ℝ → [0; l]. 18 Assuming away any principal-agent issues, 19 investors choose leverage to maximize the utility they expect to derive from dividends: max ⁡ D t-1 ≥ 0 E t − 1   u ( δ t ) = ∫ ℝ u [ ( 1 − β ) ( 1 − τ ) ( ( θ − r t ) D t − 1 + θ E t − 1 ) ] d F ( θ )           ( 3 ) Investors are risk-averse and lenders are risk-neutral. We make the standard

Pietro Dallari, Mr. Nicolas End, Fedor Miryugin, Alexander F. Tieman, and Mr. Seyed Reza Yousefi
This paper investigates the role of tax incentives towards debt finance in the buildup of leverage in the nonfinancial corporate (NFC) sector, using a large firm-level dataset. We find that so-called debt bias is a significant driver of leverage, for both small and medium-sized enterprises and larger firms, with its effect accounting for about a quarter of leverage. The strength of this effect differs with firm size, the availability of collateral, income and income volatility, cash flow, and capital intensity. We conclude that leveling the playing field between debt and equity finance through tax policy reform would decrease NFC leverage, reducing economic risks posited by leverage.