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Information, Nonexcludability, and Financial Market Structure

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  • Anand, Bharat N
  • Galetovic, Alexander

Abstract

We study the determinants of market structure in financial intermediation markets when property rights over information are weak. We show that incentives to gather information to screen firms can be preserved in decentralized markets with more than one intermediary. Local monopoly power is sustained by an aggregate oligopolistic market structure, where intermediaries voluntarily refrain from free riding. We find that this market structure is robust to entry and does not change with market size. We apply our theory to two markets--investment banking and venture capital--and use it to organize and interpret the evidence. Copyright 2000 by University of Chicago Press.

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  • Anand, Bharat N & Galetovic, Alexander, 2000. "Information, Nonexcludability, and Financial Market Structure," The Journal of Business, University of Chicago Press, vol. 73(3), pages 357-402, July.
    • Handle: RePEc:ucp:jnlbus:v:73:y:2000:i:3:p:357-402
    DOI: 10.1086/209647
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    6. Chu, Yinxiao & Li, Zhao & Wei, Jianxing & Wu, Weixing, 2022. "A tale of two markets: Labor market mobility and bank information sharing," Journal of Economic Dynamics and Control, Elsevier, vol. 141(C).
    7. Bharant N. Anand & Alexander Galetovic, 2000. "Relationships, Competition, and the Structure of Investment Banking Markets," Documentos de Trabajo 96, Centro de Economía Aplicada, Universidad de Chile.
    8. Haukioja, Teemu & Hahl, Jarmo, 2001. "The Emergence of the New Economy, and its Challenge to Financial Intermediation and Banking," Discussion Papers 772, The Research Institute of the Finnish Economy.
    9. Bharat N. Anand & Alexander Galetovic, 2002. "Does Competition Kill Relationships? Inside Investment Banking," Documentos de Trabajo 119, Centro de Economía Aplicada, Universidad de Chile.
    10. Jungherr, Joachim, 2018. "Bank opacity and financial crises," Journal of Banking & Finance, Elsevier, vol. 97(C), pages 157-176.
    11. Dessí, Roberta, 2009. "Contractual Execution, Strategic Incompleteness and Venture Capital," CEPR Discussion Papers 7413, C.E.P.R. Discussion Papers.
    12. José Miguel Benavente & Alexander Galetovic & Ricardo Sanhueza, 2005. "La dinámica industrial y el financiamiento de las pyme," Documentos de Trabajo 201, Centro de Economía Aplicada, Universidad de Chile.
    13. Régis Breton, 2003. "A Smoke Screen Theory of Financial Intermediation," Post-Print halshs-00257188, HAL.
    14. Shivdasani, Anil & Song, Wei-Ling, 2011. "Breaking down the barriers: Competition, syndicate structure, and underwriting incentives," Journal of Financial Economics, Elsevier, vol. 99(3), pages 581-600, March.
    15. John Asker, 2006. "Sharing Investment Bankers," Working Papers 06-23, New York University, Leonard N. Stern School of Business, Department of Economics.
    16. Carbo-Valverde, Santiago & Rodriguez-Fernandez, Francisco & Saunders, Anthony, 2021. "Underwriting bank bonds: Information sharing, certification and distribution networks," Journal of Corporate Finance, Elsevier, vol. 70(C).
    17. Shiyang Huang & Yan Xiong & Liyan Yang, 2022. "Skill Acquisition and Data Sales," Management Science, INFORMS, vol. 68(8), pages 6116-6144, August.
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    19. Usman Bashir & Shoaib Khan & Abdulhafiz Jones & Muntazir Hussain, 2021. "Do banking system transparency and market structure affect financial stability of Chinese banks?," Economic Change and Restructuring, Springer, vol. 54(1), pages 1-41, February.
    20. Shivdasani, Anil & Song, Wei-Ling, 2010. "Breaking Down the Barriers: Competition, Syndicate Structure, and Underwriting Incentives," Working Papers 10-25, University of Pennsylvania, Wharton School, Weiss Center.
    21. Bharat N. Anand & Alexander Galetovic, 2002. "Investment Banking and Security Market Development: Does Finance Follow Industry?," Documentos de Trabajo 121, Centro de Economía Aplicada, Universidad de Chile.
    22. John Asker & Alexander Ljungqvist, 2010. "Competition and the Structure of Vertical Relationships in Capital Markets," Journal of Political Economy, University of Chicago Press, vol. 118(3), pages 599-647, June.
    23. Chemmanur, Thomas J. & Wilhelm, William Jr., 2002. "New Technologies, Financial Innovation, and Intermediation," Journal of Financial Intermediation, Elsevier, vol. 11(1), pages 2-8, January.
    24. Alfred Yawson & Huizhong Zhang, 2021. "Central Hub M&A Advisors [Common advisers in mergers and acquisitions: determinants and consequences]," Review of Finance, European Finance Association, vol. 25(6), pages 1817-1857.
    25. Trauten, Andreas, 2004. "Zur Effizienz von Wertpapieremissionen über Internetplattformen," Working Papers 8, University of Münster, Competence Center Internet Economy and Hybrid Systems, European Research Center for Information Systems (ERCIS).

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