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Multiple Avenues of Intermediation, Corporate Finance and Financial Stability

  • E. P. Davis

Using data from the US, UK, Japan and Canada, this paper provides evidence on the benefits to an economy from "multiple avenues of intermediation". The overall conclusion is that the existence of active securities markets alongside banks is indeed beneficial to the stability of corporate financing, both during cyclical downturns and during banking and securities market crises. The benefit from multiple avenues are greater, the more comparable the size of securities market and intermediated financing, as well as the larger the proportion of companies able to access both loan and securities markets. The analysis raises a number of policy issues and research topics for further investigation.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 01/115.

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Length: 52
Date of creation: 01 Aug 2001
Date of revision:
Handle: RePEc:imf:imfwpa:01/115
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  1. Kashyap, Anil K & Stein, Jeremy C & Wilcox, David W, 1993. "Monetary Policy and Credit Conditions: Evidence from the Composition of External Finance," American Economic Review, American Economic Association, vol. 83(1), pages 78-98, March.
  2. Bernanke, Ben & Gertler, Mark & Gilchrist, Simon, 1994. "The Financial Accelerator and the Flight to Quality," Working Papers 94-24, C.V. Starr Center for Applied Economics, New York University.
  3. Gertler, Mark & Gilchrist, Simon, 1993. "The cyclical behavior of short-term business lending: Implications for financial propagation mechanisms," European Economic Review, Elsevier, vol. 37(2-3), pages 623-631, April.
  4. Hutchison, Michael & McDill, Kathleen, 1999. "Are All Banking Crises Alike? The Japanese Experience in International Comparison," Journal of the Japanese and International Economies, Elsevier, vol. 13(3), pages 155-180, September.
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  6. Davis, E Philip & Mayer, Colin, 1991. "Corporate Finance in the Euromarkets and the Economics of Intermediation," CEPR Discussion Papers 570, C.E.P.R. Discussion Papers.
  7. Knight, Malcolm, 1998. "Developing Countries and the Globalization of Financial Markets," World Development, Elsevier, vol. 26(7), pages 1185-1200, July.
  8. Mitchell A. Petersen & Raghuram G. Rajan, 1994. "The Effect of Credit Market Competition on Lending Relationships," NBER Working Papers 4921, National Bureau of Economic Research, Inc.
  9. Franklin Allen & Douglas Gale, 1994. "A Welfare Comparison of the German and U.S. Financial Systems," Center for Financial Institutions Working Papers 94-12, Wharton School Center for Financial Institutions, University of Pennsylvania.
  10. Malcolm D. Knight, 1998. "Developing Countries and the Globalization of Financial Markets," IMF Working Papers 98/105, International Monetary Fund.
  11. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  12. Frederic S. Mishkin, 1990. "Asymmetric Information and Financial Crises: A Historical Perspective," NBER Working Papers 3400, National Bureau of Economic Research, Inc.
  13. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
  14. Allen, Franklin & Santomero, Anthony M., 1997. "The theory of financial intermediation," Journal of Banking & Finance, Elsevier, vol. 21(11-12), pages 1461-1485, December.
  15. Jeffery W. Gunther & Cara S. Lown & Kenneth J. Robinson, 1991. "Bank credit and economic activity: evidence from the Texas banking decline," Financial Industry Studies Working Paper 91-5, Federal Reserve Bank of Dallas.
  16. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
  17. Takeo Hoshi & Anil Kashyap, 1999. "The Japanese Banking Crisis: Where Did It Come From and How Will It End?," NBER Working Papers 7250, National Bureau of Economic Research, Inc.
  18. Scholtens, Bert & van Wensveen, Dick, 2000. "A critique on the theory of financial intermediation," Journal of Banking & Finance, Elsevier, vol. 24(8), pages 1243-1251, August.
  19. Diamond, Douglas W, 1991. "Monitoring and Reputation: The Choice between Bank Loans and Directly Placed Debt," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 689-721, August.
  20. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
  21. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1993. "The Choice Between Public and Private Debt: An Analysis of Post-Deregulation Corporate Financing in Japan," NBER Working Papers 4421, National Bureau of Economic Research, Inc.
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