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Bank and Nonbank Financial Intermediation

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  • PHILIP BOND

Abstract

Conglomerates, trade credit arrangements, and banks are all instances of financial intermediation. However, these institutions differ significantly in the extent to which the projects financed absorb aggregate intermediary risk, in whether or not intermediation is carried out by a financial specialist, in the type of projects they fund and in the type of claims they issue to investors. The paper develops a simple unified model that both accounts for the continued coexistence of these different forms of intermediation, and explains why they differ. Specific applications to conglomerate firms, trade credit, and banking are discussed. Copyright 2004 by The American Finance Association.

Suggested Citation

  • Philip Bond, 2004. "Bank and Nonbank Financial Intermediation," Journal of Finance, American Finance Association, vol. 59(6), pages 2489-2529, December.
    • Handle: RePEc:bla:jfinan:v:59:y:2004:i:6:p:2489-2529
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    1. repec:bla:eufman:v:16:y:2010:i:3:p:345-373 is not listed on IDEAS
    2. Régis Breton, 2003. "A Smoke Screen Theory of Financial Intermediation," Post-Print halshs-00257188, HAL.
    3. Sonia Ruano & Robert M. Townsend & Jesus Saurina & Alexander Karaivanov, 2010. "No Bank, One Bank, Several Banks: Does It Matter for Investment?," 2010 Meeting Papers 669, Society for Economic Dynamics.
    4. Albert Banal-Estañol & Marco Ottaviani & Andrew Winton, 2013. "The Flip Side of Financial Synergies: Coinsurance Versus Risk Contamination," Review of Financial Studies, Society for Financial Studies, vol. 26(12), pages 3142-3181.
    5. Wang, Tianxi, 2009. "The Allocation of Liability: Why Financial Intermediation?," Economics Discussion Papers 2957, University of Essex, Department of Economics.
    6. Maryam Farboodi, 2014. "Intermediation and Voluntary Exposure to Counterparty Risk," 2014 Meeting Papers 365, Society for Economic Dynamics.
    7. Linda Allen & Aron Gottesman, 2006. "The Informational Efficiency of the Equity Market As Compared to the Syndicated Bank Loan Market," Journal of Financial Services Research, Springer;Western Finance Association, vol. 30(1), pages 5-42, August.
    8. Sandeep Baliga & Tomas Sjöström, 2008. "Strategic Ambiguity and Arms Proliferation," Journal of Political Economy, University of Chicago Press, vol. 116(6), pages 1023-1057, December.

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