Show Less

Why Banks?

Microeconomic Foundations of Financial Intermediaries

Series:

Ilonka Rühle

In the banking literature the existence of financial intermediaries is generally explained in terms of the transformation of risks, terms and lot-sizes. Yet these functions could also be performed by system of perfect and complete markets. Therefore, the approach taken in Why Banks? is to start by investigating the conditions that, in the real world, render markets imperfect and incomplete, namely asymmetric information distribution and uncertainty. Incentive compatible financing instruments (standard debt contracts as well as equity participation) provide a means of solving these problems. Financial intermediaries ultimately owe their existence to their ability to save transaction costs using these instruments and to solve problems relating to the enforcement of contracts.

Prices

Show Summary Details
Restricted access

BM 1 LVIII

Extract

Bd.Nol. Entwicklung und Finanzierung Development and Finance Herausgegeben von I Edited by Reinhardt H. Schmidt Claus-Peter Zeilinger Heike Prof!: Auswirkungen der Politik der internationalen Finanzinstitutionen (IWF und Weltbank) auf importintensive und exportorientierte Unternehmen in Ghana. 1994. Bd.Nol. 2 Martin Holtmann I Rochus Mornmartz: Technical Guide for Analyzing the Efficiency of Credit-Granting I Non-Governmental Organizations (NGOs). 1996. Band 1 + 2 sind im Verlag fUr Entwicklungspolitik Breitenbach GmbH, SaarbrOcken, erschienen und auch von dort zu beziehen. Vol. 1 + 2 have already been published by Verlag fUr Entwicklungspolitik, Breitenbach GmbH, Saar- brucken, and are obtainable through the publishers. Entwicklung und Finanzierung Development and Finance Herausgegeben von I Edited by Manfred Nitsch, Reinhardt H. Schmidt und Claus-Peter Zeilinger Bd.Nol. 3 llonka Ruhle: Why Banks? Microeconomic Foundations of Financial Intermediaries. 1997. In the banking literature the existence of financial intermediaries is gen- erally explained in terms of the transformation of risks, terms and lot-sizes. Yet these functions could also be performed by a system of perfect and complete markets. Therefore, the approach taken in Why Banks? is to start by investigating the conditions that, in the real world, render markets imperfect and incomplete, namely asymmetric information distribution and uncertainty. Incentive compatible financing instruments (standard debt contracts as well as equity participation) provide a means of solving these problems. Financial intermediaries ultimately owe their existence to their ability to save transaction costs using these instruments and to solve problems relating to the enforcement of contracts. llonka RUhle, born in 1960, studied economics at the...

You are not authenticated to view the full text of this chapter or article.

This site requires a subscription or purchase to access the full text of books or journals.

Do you have any questions? Contact us.

Or login to access all content.