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Asymmetric information and financial intermediation

The aim of this research paper is to show that financial intermediaries can be viewed as a natural response to asymmetric information in financial markets.

First, this statement will be demonstrated by showing that the problems both of returns from information production, and of its credibility can be solved only through the existence of financial intermediaries in the markets.

Second, having proved that, the diversification of portfolio and in the intermediaries’ structure will be defined as a comparative advantage for financial intermediaries, because it minimises the costs of the so-called delegated monitoring, which, otherwise, would be paid by private lenders and, consequently the exchange of information between investors and borrowers would get more and more difficult.

Third, the possibility to overcome asymmetric information by using bank loans will be explained. This evidence come first from an analysis of the stock price response to announcements of bank loans, private placements of debts, and public straight debt issues.
In fact, conditions at which one loan is granted are means to understand the value of a firm, because banks have usually information through them, that are not available for the market.

Mostra/Nascondi contenuto.
INTRODUCTION The aim of this research paper is to show that financial intermediaries can be viewed as a natural response to asymmetric information in financial markets. First, this statement will be demonstrated by showing that the problems both of returns from information production, and of its credibility can be solved only through the existence of financial intermediaries in the markets. Second, having proved that, the diversification of portfolio and in the intermediaries’ structure will be defined as a comparative advantage for financial intermediaries, because it minimises the costs of the so- called delegated monitoring, which, otherwise, would be paid by private lenders and, consequently the exchange of information between investors and borrowers would get more and more difficult. Third, the possibility to overcome asymmetric information by using bank loans will be explained. This evidence come first from an analysis of the stock price response to announcements of bank loans, private placements of debts, and public straight debt issues. In fact, conditions at which one loan is granted are means to understand the value of a firm, because banks have usually information through them, that are not available for the market.

Tesi di Laurea

Autore: Maria Palumbo Contatta »

Composta da 19 pagine.

 

Questa tesi ha raggiunto 907 click dal 20/03/2004.

Disponibile in PDF, la consultazione è esclusivamente in formato digitale.