Financial Development and Property Valuation

Shahid Ebrahim

ERES from European Real Estate Society (ERES)

Abstract: This paper models the agency theoretic perspective of risk averse investors and financiers (under symmetric information) to demonstrate the increase in pareto-efficiency as financial architecture advances from a bank to capital markets. This is attributed to the reduction in agency costs leading to an increase in the value of property. Our results predict that an optimal financial system will configure itself skewed towards capital markets irrespective of the source of its origination (from specialized banking system or universal banking system). We also rationalize the co-existence of banks and capital markets in a well-developed financial system.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2007-01-01
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Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:eres2007_169

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