Beruflich Dokumente
Kultur Dokumente
Abstract
This essay reflects upon the relationship between the current theory of
financial intermediation and real-world practice. Our critical analysis of this
theory leads to several building blocks of a new theory of financial
intermediation.
Current financial intermediation theory builds on the notion that
intermediaries serve to reduce transaction costs and informational
asymmetries. As developments in information technology, deregulation,
deepening of financial markets, etc. tend to reduce transaction costs and
informational asymmetries, financial intermediation theory shall come to the
conclusion that intermediation becomes useless. This contrasts with the
practitioners view of financial intermediation as a value-creating economic
process. It also conflicts with the continuing and increasing economic
importance of financial intermediaries. From this paradox, we conclude that
current financial intermediation theory fails to provide a satisfactory
understanding of the existence of financial intermediaries.
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We wish to thank Arnoud Boot, David T. Llewellyn, Martin M.G. Fase and Robert Merton
for their help and their stimulating comments. However, all opinions reflect those of the authors
and only we are responsible for mistakes and omissions.
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Associate Professor of Financial Economics at the University of Groningen; PO Box 800;
9700 AV Groningen; The Netherlands (corresponding author).