Do Financial Institutions Matter?

Franklin Allen

Center for Financial Institutions Working Papers from Wharton School Center for Financial Institutions, University of Pennsylvania

Abstract: In standard asset pricing theory, investors are assumed to invest directly in financial markets. The role of financial institutions is ignored. The focus in corporate finance is on agency problems. How do you ensure that managers act in shareholders' interests? There is an inconsistency in assuming that when you give your money to a financial institution there is no agency problem but when you give it to a firm there is. It is argued both areas need to take proper account of the role of financial institutions and markets. Appropriate concepts for analyzing particular situations should be used.

Date: 2001-02
New Economics Papers: this item is included in nep-fmk, nep-mfd and nep-pke
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Citations: View citations in EconPapers (87)

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Journal Article: Do Financial Institutions Matter? (2001)
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