Handbook of Financial Intermediation and Banking (original) (raw)
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Since its inception in 1990, The Journal of Financial Intermediation has striven to be a high-quality outlet for empirical and theoretical research in financial intermediation, market microstructure, and corporate finance. This article briefly reviews the output of the Journal since its inception, describes recent changes, and takes a look at the future.
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This comment discusses the review by Franklin Allen and Anthony Santomero of the theory of ®nancial intermediation in the 20th anniversary special issue of the Journal of Banking and Finance. We do not fully agree with their view that risk management is only of recent importance to the ®nancial industry and with putting central the concept of participation costs. We suggest how the theory of ®nancial intermediation might be developed further in order to understand present-day phenomena in the ®nancial services sector.
Journal of Banking & Finance, 1989
This paper considers the consequences of enduring relationships for bank s~ructure and policy tn an information-based banking model. Adding a richer time dimensi_¢n allows repeated lending between the intermediary and borrower. This contact |ets a bank produce information and enforce compliance more easily thaa direct monitoring of the borrower's organization. This implies an asymmetric banking structure: banks enter long-term relationships with borrowers, but not with depositors. Next, it shows how enduring relationships solve problems with loan participations and security underwriting by commercial banks.
Financial Intermediairies by Tadjeddine
Classical financial theory ignores the existence of financial intermediaries. In neoclassical micro-economics, the capital market brings together agents with financing capacity – investors – and agents with financing needs – companies. Thanks to the private information they possess, the latter on the productive potential of the company, the former on the marginal productivity of their investment, the trade can take place. I propose first of all to review the discourse that legitimises financial intermediaries through economic theory. This naturalised vision of finance could not be further removed from reality: the financial security only exists because of the presence of systems and organisations that give it its attributes (liquidity, status), take care of its distribution (via market institutions, distributors, advisors) and ensure its price history can be traced. The angle adopted is a resolutely micro-economic one, starting with the initial theory of financial intermediation put forward by Gurley and Shaw (1956). In a second part, I will present some socio-politically-inspired approaches that highlight the appearance of financial intermediaries through the possibility of legitimising the capture of economic rents. This aspect, which appears in many recent works focusing on the financialisation of the economy, emphasises the link between financial institutions and certain forms of political domination. Finally, the third part will present some of my own work in the field of social studies of finance which are based on observational field research and which explore the socioeconomic nature of financial intermediation. JEL: G2 Classical financial theory ignores the existence of financial intermediaries. In neoclassical micro-economics, the capital market brings together agents with financing capacity – investors – and agents with financing needs – companies. Thanks to the private information they possess, the latter on the productive potential of the company, the former on the marginal productivity of their investment, the trade can take place. In the Asset Pricing Theory approach, only financial securities are considered, these being defined through two statistical dimensions: their risk and their return. The resulting optimum portfolio depends on these parameters as well as on the investor's degree of risk aversion. Once again, there is no need to seek the services of an intermediary. Naturally, in macroeconomics , we find the same absence. Hicks (1974) contrasts the intermediated economy with the market economy where investors purchase their securities directly from issuers. The bank is distinguished by its inevitable presence in the transformation of deposits into loans. This naturalised vision of finance could not be further removed from reality: the financial security only exists because of the presence of systems and organisations that give it its attributes (liquidity, status), take care of its distribution (via market institutions, distributors, advisors) and ensure its price history can be traced. For financial institutions existed before securities (Carruthers, Stinchcombe, 1999) and it is these institutions and not securities themselves that have driven the development of finance. Without them, without their reputation, without the trust the community places in them, securities
The Role of Financial Intermediaries in Equity Markets
In this paper, we will analyse the role of brokers, dealers and investment banks in the equity markets. Special attention will be given in analysing the role of financial intermediaries at initial public offerings and secondary offerings, according to the legal framework in Serbia. Serbia, as other transitional economies, has problems in mobilising funds for its stock exchange. Especially local savers do not trust the local financial system, especially the stock exchange. One of the major reasons for this distrust, besides bad experiences in the past, is a lack of knowledge about the functioning of stock exchanges. On the other hand, companies in Serbia often rely on debt-based financial instruments, where they have to pay high interest rates. However, equity financing with partners, especially with many partners is at a very low level. Therefore, we want to analyse the functioning of equity markets by explaining the concept of stocks, public offerings and the role of financial intermediaries in this process.
A Model of Financial Markets and Financial Intermediation
Available at SSRN 113528, 1998
We build a model with a wide variety of players (liquidity traders, market makers, financial intermediaries, borrowers and lenders). The paper derives the individual and aggregate behavior of participants who are involved in financial interchanges taking into consideration the capacity of some participants to choose the role they want to play and the capacity to allocate funds between financial intermediaries and markets. It is showed that the values of the parameters are crucial in determining which players will and will not exist.