Corporate Financial Policy and the Theory of Financial Intermediation

Research output: Contribution to journalArticlepeer-review

22 Scopus citations


This paper examines the optimal structure of financial contracts in an economy subject to two forms of moral hazard. Multiple information problems are shown to generate a role for multiple classes of financial claimants. We then show that economic efficiency is enhanced if the financial structure of the economy consists of both direct and intermediated financial contract markets. Consequently, our results demonstrate a motivation for the complementarity between capital markets and depository financial institutions. 1990 The American Finance Association

Original languageEnglish (US)
Pages (from-to)351-377
Number of pages27
JournalThe Journal of Finance
Issue number2
StatePublished - Jun 1990
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics
  • Accounting
  • Finance


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