Optimal Structure of the Financial Intermediation Industry
1991 (English)Report (Other academic)
The optimal structure of the financial intermediation industry in a finite economy, where the role of intermediaries is to reduce information costs in the lending of resources from investors to entrepeneurs, is characterized. Banks are owned by entrepeneurs in order to exploit informational gains from close relationships between banks and firms. It is shown that this form of ownership is a reason for allowing more than one bank to operate, although there are economies of scale in intermediation. It is also argued that free entry into intermediation generally would not provide the optimal number of banks.
Place, publisher, year, edition, pages
Stockholm: IIES , 1991. , 46 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 489
IdentifiersURN: urn:nbn:se:su:diva-41795OAI: oai:DiVA.org:su-41795DiVA: diva2:337782