An Information-based Theory of Financial Intermediation

Zachary Bethune, Bruno Sultanum and Nicholas Trachter

No 403, 2019 Meeting Papers from Society for Economic Dynamics

Abstract: We advance a theory of intermediation that builds on private information and heterogeneous screening ability across market participants. We solve for the equilibrium market structure and show that investors with high screening ability are the largest intermediators: they are the most central in trade, they trade frequently, they trade with many different counterparties, and they extract high rents. We derive a set of testable predictions from the model and we test them using transaction-level micro data. Our empirical results provide evidence that our mechanism relying on private information and screening ability is a relevant feature of intermediation in over-the-counter markets.

Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2019/paper_403.pdf (application/pdf)

Related works:
Journal Article: An Information-based Theory of Financial Intermediation (2022)
Working Paper: An Information-Based Theory of Financial Intermediation (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed019:403

Access Statistics for this paper

More papers in 2019 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().