The Governance of Perpetual Financial Intermediaries

Jos van Bommel () and Jose Penalva
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Jose Penalva: LSF

LSF Research Working Paper Series from Luxembourg School of Finance, University of Luxembourg

Abstract: In this paper we investigate the risk sharing potential of financial intermediaries in an overlapping generations economy. We find that the intermediaries allocations are constrained by the temptation of the living to liquidate their intermediary s assets and share the proceeds amongst themselves. We characterize the characterize this constraint set, and show that only intermediaries that can avoid side trading and the rolling over of deposits can improve on the market allocation. Furthermore, intermediaries may not achieve the constrained optimal allocation because the living are not willing to build a sufficiently large asset buffer.

Keywords: Financial Intermediation; Overlapping Generations (search for similar items in EconPapers)
JEL-codes: D91 G21 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-dge
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Persistent link: https://EconPapers.repec.org/RePEc:crf:wpaper:12-10

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