Do Financial Institutions Matter?
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.Download Info
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Paper provided by Wharton School Center for Financial Institutions, University of Pennsylvania in its series Center for Financial Institutions Working Papers with number 01-04.Length:
Date of creation: Feb 2001
Date of revision:
Handle: RePEc:wop:pennin:01-04
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Keywords:This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-07-23 (All new papers)
- NEP-FMK-2001-07-23 (Financial Markets)
- NEP-MFD-2001-07-25 (Microfinance)
- NEP-PKE-2001-07-23 (Post Keynesian Economics)
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