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Institutional Markets, Financial Marketing, and Financial Innovation

Author

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  • STEPHEN A. ROSS

Abstract

Firms and institutions are monitored and controlled through a complex set of implicit and explicit contractual relations. Because of these agency theoretic relations, institutional behavior in financial markets is not a simple reflection of the preference structures of individuals. Institutional preferences give rise to a demand for new financial instruments and innovations, even when the returns on these instruments are “spanned” in the sense of complete pricing. The innovations can be thought of as solving moral hazard problems. An agency theoretic example serves to illustrate the demand, supply, and financial marketing of stripped securities. In short, institutions matter.

Suggested Citation

  • Stephen A. Ross, 1989. "Institutional Markets, Financial Marketing, and Financial Innovation," Journal of Finance, American Finance Association, vol. 44(3), pages 541-556, July.
  • Handle: RePEc:bla:jfinan:v:44:y:1989:i:3:p:541-556
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    File URL: https://doi.org/10.1111/j.1540-6261.1989.tb04377.x
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    Cited by:

    1. Oliver Entrop & Michael McKenzie & Marco Wilkens & Christoph Winkler, 2016. "The performance of individual investors in structured financial products," Review of Quantitative Finance and Accounting, Springer, vol. 46(3), pages 569-604, April.
    2. Zvi Bodie, 1989. "Pension Funds and Financial Innovation," NBER Working Papers 3101, National Bureau of Economic Research, Inc.
    3. Bhagwan Chowdhry & Mark Grinblatt & David Levine, 2002. "Information Aggregation, Security Design, and Currency Swaps," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 609-633, June.
    4. Wei, Shang-Jin, 1999. "Currency hedging and goods trade," European Economic Review, Elsevier, vol. 43(7), pages 1371-1394, June.
    5. repec:spr:fininn:v:4:y:2018:i:1:d:10.1186_s40854-018-0088-y is not listed on IDEAS
    6. Chowdhry, Bhagwan & Grinblatt, Mark, 1997. "Information Aggregation, Currency Swaps, and the Design of Derivative Securities," University of California at Los Angeles, Anderson Graduate School of Management qt0js61067, Anderson Graduate School of Management, UCLA.
    7. João Pinto & Mário Coutinho dos Santos, 2014. "Corporate Financing Choices after the 2007-2008 Financial Crisis," Working Papers de Economia (Economics Working Papers) 03, Católica Porto Business School, Universidade Católica Portuguesa.
    8. repec:vls:rojfme:v:4:y:2017:i:1:p:154-163 is not listed on IDEAS
    9. Ana María Olaya, 2002. "Las finanzas en la frontera del conocimiento," BORRADORES DE INVESTIGACIÓN 003114, UNIVERSIDAD DEL ROSARIO.
    10. repec:eee:jfinec:v:128:y:2018:i:1:p:38-65 is not listed on IDEAS
    11. repec:vls:rojfme:v:4:y:2017:i:1:p:275-279 is not listed on IDEAS
    12. Veld, C.H., 1991. "Motives for the use of equity-warrants by Dutch companies," Research Memorandum FEW 503, Tilburg University, School of Economics and Management.
    13. Tao Zhang & Larry A. Cox & Robert A. Van Ness, 2009. "Adverse Selection and the Opaqueness of Insurers," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(2), pages 295-321.
    14. Chip Wade & Andre Liebenberg & Benjamin M. Blau, 2016. "Information and Insurer Financial Strength Ratings: Do Short Sellers Anticipate Ratings Changes?," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 83(2), pages 475-500, June.
    15. Zenios, Stavros A., 1997. "Introduction," Journal of Economic Dynamics and Control, Elsevier, vol. 21(8-9), pages 1263-1265, June.
    16. Melnik, Arie & Shy, Oz, 2015. "Exclusion, competition, and regulation in the retail loan market," Journal of Banking & Finance, Elsevier, vol. 52(C), pages 189-198.
    17. Harilaos F. Harissis & George E. Makrivogiatzakis & Stavros E. Arvanitis, 2013. "Risk Assessment in the Context of Internal Audit in Greek Listed Companies at Athens Stock Exchange," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(3), pages 14-37.

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