Corporate Finance, Financial Intermediation and Banking: An Overview

Abstract

This paper will appear as the lead chapter in a readings book on corporate finance, financial intermediation and market microstructure. The unifying theme in the book is optimal design, and various chapters deal with the design of contracts, securities, institutions, market mechanisms, and regulation from an information-theoretic perspective. Each chapter in the book is an original review article that seeks to synthesize the literature in a given area. Six topics are covered: design of contracts and securities; market microstructure; credit market implications of bank size, scope and structure; bank regulation; and finally the interaction between interbank competition, regulation and banking stability.