Do Financial Institutions Matter?
Year: 2001
Type: article
Abstract: In standard asset pricing theory, investors are assumed to invest directly in financial markets. The role of financial institutions is ignored. The focus in corporate finance is on agency problems. How do you ensure that managers act in shareholders' interests? There is an inconsistency in assuming that when you give your money to a financial institution there is no agency problem, but when you give it to a firm there is. It is argued that both areas need to take proper account of the role of financial institutions and markets. Appropriate concepts for analyzing particular situations should be used.
Source: The Journal of Finance
Author: Franklin Allen
Institution: University of Pennsylvania
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2133953136