Investor Presentaiton

Proof (Sketch) T=0: T=1: Bank that obtains deposit of w and gives a loan to a firm that invests in a long term project which pays off x at T=2. The first depositor withdraws w from the bank. Since the fund is lent out, the bank needs to attract a new depositor. A bank will only be able to obtain new deposits if new depositors will deposit. This depends on the information sensitivity of the asset of the bank. The project has information sensitivity of л and depositors can learn about the bank before depositing at costs y.

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