Financial crises have occurred repeatedly throughout history in both high and middle-to-low income countries. This dissertation studies how the interactions of financial market participants affect financial stability. In the first part of the dissertation, I analyze sales of assets between financial institutions in the United States and find evidence consistent with the theory that credit-constraints affect the demand for, and price of, assets sold in fire-sales. In the second part, I document the empirical regularity that the correlation of banks' stock return - a measure of the interconnectedness of banks - increases in the run up to banking crises and thus helps predict crises. The third part finds that the main measure of asset risk-exposure that banks report to regulators are thought to be credible by equity investors, but less so in countries where regulators have allowed banks more discretion over the calculation of the measure.