Toward a Theory of Optimal Financial Structure

32 Pages Posted: 20 Apr 2016

See all articles by Justin Y. Lin

Justin Y. Lin

Peking University - China Center for Economic Research

Xifang Sun

affiliation not provided to SSRN

Ye Jiang

affiliation not provided to SSRN

Date Written: September 1, 2009

Abstract

Each institutional arrangement in a financial system has both advantages and disadvantages in mobilizing savings, allocating capital, diversifying risks, and processing information when facilitating financial transactions. Meanwhile, the factor endowment in an economy at each stage of its development determines the optimal industrial structure in the real sector, which in turn constitutes the main determinant of the size distribution and risk features of viable enterprises with implications for the appropriate institutional arrangement of financial services at that stage. Therefore, there is an endogenously determined optimal financial structure for the economy at each stage of development.

Keywords: Banks & Banking Reform, Debt Markets, Access to Finance, Financial Intermediation

Suggested Citation

Lin, Justin Yifu and Sun, Xifang and Jiang, Ye, Toward a Theory of Optimal Financial Structure (September 1, 2009). World Bank Policy Research Working Paper No. 5038, Available at SSRN: https://ssrn.com/abstract=1471136

Justin Yifu Lin (Contact Author)

Peking University - China Center for Economic Research ( email )

No. 38 Xueyuan Road
Haidian District
Beijing, Beijing 100871
China

Xifang Sun

affiliation not provided to SSRN ( email )

Ye Jiang

affiliation not provided to SSRN

No Address Available

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