Financial Intermediation - Definition
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Financial Intermediation Definition Academic Research on Financial Intermediation Financial intermediationand delegated monitoring, Diamond, D. W. (1984). The review of economic studies,51(3), 393-414. This paper develops a theory of financial intermediation based on minimizing the cost of monitoring information which is useful for resolving incentive problems between borrowers and lenders. It presents a characterization of the costs of providing incentives for delegated monitoring by a financial intermediary. The paper presents some more general analysis of the effect of diversification on resolving incentive problems. Informational asymmetries,financialstructure, andfinancial intermediation, Brealey, R., Leland, H. E., & Pyle, D. H. (1977).The journal of Finance,32(2), 371-387. This essay details a model of capital structure and financial equilibrium, developed in order to provide more theoretical information about informational asymmetries, financial structure, and financial intermediation. This model demonstrates how a firm's value increases with the share of the firm shared by the entrepreneur, and a firm's financial structure can be related to a project or firm's value. Financial intermediationand growth: Causality and causes, Levine, R., Loayza, N., & Beck, T. (2000). Journal of monetary Economics,46(1), 31-77. This paper evaluates whether the exogenous component of financial intermediary development influences economic growth and whether cross-country differences in legal and accounting systems explain differences in the level of financial development. The paper aims to show that legal and accounting reforms that strengthen creditor rights, contract enforcement, and accounting practices can boost financial development and accelerate economic growth. Financial intermediation, loanable funds, and the real sector, Holmstrom, B., & Tirole, J. (1997).the Quarterly Journal of economics,112(3), 663-691. This paper studies an incentive model of financial intermediation in which firms as well as intermediaries are capital constrained. It analyzes how the distribution of wealth across firms, intermediaries, and uninformed investors affects investment, interest rates, and the intensity of monitoring. The paper shows that all forms of capital tightening hit poorly capitalized firms the hardest, but that interest rate effects and the intensity of monitoring will depend on relative changes in the various components of capital. Financial intermediationand endogenous growth, Bencivenga, V. R., & Smith, B. D. (1991).The review of economic studies,58(2), 195-209. In this paper, an endogenous growth model with multiple assets is developed. The paper suggests that agents who face random future liquidity needs accumulate capital and a liquid, but unproductive asset. The effects of introducing financial intermediation into this environment are considered. In addition, it shows that intermediaries generally reduce socially unnecessary capital liquidation, again tending to promote growth. The theory offinancial intermediation, Allen, F., & Santomero, A. M. (1997). Journal of Banking & Finance,21(11-12), 1461-1485. This paper discusses the role of intermediation in stressing risk trading and participation costs. Costly monitoring,financial intermediation, and equilibrium credit rationing, Williamson, S. D. (1986).Journal of Monetary Economics,18(2), 159-179. This paper establishes a link between equilibrium credit rationing and financial intermediation, in a model with asymmetrically informed lenders and borrowers, costly monitoring, and investment project indivisibilities. Intermediation is shown to dominate borrowing and lending between individuals, and these financial intermediaries exhibit several of the important features of intermediaries. Information reliability and a theory offinancial intermediation, Ramakrishnan, R. T., & Thakor, A. V. (1984).The Review of Economic Studies,51(3), 415-432. This paper is an analysis of when it will be beneficial for agents engaged in the production of information to form coalitions. The model is cast in a financial market framework, thus leading to an identification of conditions sufficient for the existence of financial intermediaries. Financial intermediationand credit policy in business cycle analysis, Gertler, M., & Kiyotaki, N. (2010). InHandbook of monetary economics(Vol. 3, pp. 547-599). Elsevier. This paper develops a canonical framework to think aboutcredit marketfrictions and aggregate economic activity in the context of the current crisis. The paper uses the framework to address how disruptions in financial intermediation can induce a crisis that affects real activity, and how various credit market interventions by thecentral bankand the Treasury might work to mitigate the crisis. Proprietary information,financial intermediation, and research incentives, Bhattacharya, S., & Chiesa, G. (1995). Journal of Financial Intermediation,4(4), 328-357. This paper contrasts equilibria in loan markets with bilateral bank-borrower ties, in which proprietary technological knowledge of borrowers is not revealed to product market competitors, with equilibria under multilateral financing in which such knowledge may be shared among competing borrowing firms. Using each of these two institutional arrangements, the paper examines the conditions for existence of equilibrium, its ex ante optimality, and borrowing firms incentives to engage in private costly research. Financial intermediationand economic performance: historical evidence from five industrialized countries, Rousseau, P. L., & Wachtel, P. (1998). Journal of money, credit and banking, 657-678. This paper examines the nature of links between the intensity of financial intermediation and economic performance that operated in the United States, the United Kingdom, Canada, Norway, and Sweden over the 1870-1929 period. The market for information and the origin offinancial intermediation, Allen, F. (1990). Journal of financial intermediation,1(1), 3-30.