Financial Institutions, Information, & Investing-At-A-Distance

21 Pages Posted: 18 May 2012

See all articles by Gordon L. Clark

Gordon L. Clark

Oxford University - Smith School of Enterprise and the Environment

Ashby Monk

Stanford University

Date Written: May 17, 2012

Abstract

Seminal papers on the size of the firm emphasise the benefits of in-sourcing over outsourcing services from the market. This provides a rationale for the development of large firms, especially in circumstances of market risk and uncertainty as to the price and quantity of available services. This model is less successful when considering the scope of the firm – what firms do and where they do it, given their assets and the complementarities between related activities. In this paper, we develop a model of the firm that is sensitive to the production and consumption of information (internal and external to the firm). Links are made between what the firm does and where it does it in relation to the information systems that enable firms to reach beyond what they are able to achieve within their own organisations. This model is particularly relevant to financial institutions, many of which face hard-to-realise expectations as to their investment performance. Making good on these expectations depends on the degree to which financial institutions can effectively mobilise information at the margin of markets. In the penultimate section of the paper, we consider the virtues or otherwise of three particular models of investing-at-a-distance. In conclusion, lessons are drawn for the theory and practice of financial intermediation in the context of increasingly distant investment opportunities.

Keywords: Buzz, finance, institutional investors, investment, governance, information, networks, pipelines

JEL Classification: D02, D21, G23, G32

Suggested Citation

Clark, Gordon L. and Monk, Ashby, Financial Institutions, Information, & Investing-At-A-Distance (May 17, 2012). Available at SSRN: https://ssrn.com/abstract=2061700 or http://dx.doi.org/10.2139/ssrn.2061700

Gordon L. Clark

Oxford University - Smith School of Enterprise and the Environment ( email )

South Parks Road
Oxford, OX1 3QY
United Kingdom
+44 1865 285197 (Phone)
+44 1865 285073 (Fax)

HOME PAGE: http://www.geog.ox.ac.uk/staff/glclark.html

Ashby Monk (Contact Author)

Stanford University ( email )

United States

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