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A quantitative investigation of financial intermediation in the United States over the past 130 years yields the following results: (i) the finance industry's share of gross domestic product (GDP) is high in the 1920s, low in the 1960s, and high again after 1980; (ii) most of these variations can be explained by corresponding changes in the quantity of intermediated assets (equity, household and corporate debt, liquidity); (iii) intermediation has constant returns to scale and an annual cost of 1.5-2 percent of intermediated assets; (iv) secular changes in the characteristics of firms and households are quantitatively important.

I develop a search-and-bargaining model of endogenous intermediation in over-the-counter markets. Unlike the existing work, my model allows for rich investor heterogeneity in three simultaneous dimensions: preferences, inventories, and meeting rates. By comparing trading-volume patterns that arise in my model and are observed in practice, I argue that the heterogeneity in meeting rates is the main driver of intermediation patterns. I find that investors with higher meeting rates (i.e., fast investors) are less averse to holding inventories and more attracted to cash earnings, which makes the model corroborate a number of stylized facts that do not emerge from existing models: (i) fast investors provide intermediation by charging a speed premium, and (ii) fast investors hold more extreme inventories. Then, I use the model to study the effect of trading frictions on the supply and price of liquidity. On social welfare, I show that the interaction of meeting rate heterogeneity with optimal inventory management makes the equilibrium inefficient. I provide a financial transaction tax/subsidy scheme that corrects this inefficiency, in which fast investors cross-subsidize slow investors.

How much capital should financial intermediaries hold? We propose a general equilibrium model with a financial sector that makes risky long-term loans to firms, funded by deposits from savers. Government guarantees create a role for bank capital regulation. The model captures the sharp and persistent drop in macro-economic aggregates and credit provision as well as the sharp change in credit spreads observed during financial crises. Policies requiring intermediaries to hold more capital reduce financial fragility, reduce the size of the financial and non-financial sectors, and lower intermediary profits. They redistribute wealth from savers to the owners of banks and non-financial firms. Pre-crisis capital requirements are close to optimal. Counter-cyclical capital requirements increase welfare.

Partial dollarization is a significant phenomenon in the banking sectors of many developing countries, yet evidence on its spread through bank branch networks remains scarce. This paper investigates interregional capital flows within Cambodia’s banking system, characterized by the coexistence of multiple currencies. Using branch-level deposit and loan data, we developed a measure of the regional fund flows to fit the banking sector for developing countries. Our findings reveal that excess funds from deposits in Phnom Penh and wholesale funding significantly cover lending across provincial regions for both United States dollars and riels. However, banks reallocate funds in riel less actively, despite recent increases in riel deposits. Regional differences in loan and deposit demand between currencies further highlight distinct patterns. This study underscores the need to understand currency-specific trends to promote local currency usage and enhance financial inclusion in dollarized economies.

A significant body of research has examined how new organizations gain legitimacy and how gaining it affects their subsequent access to resources. Less attention has been given to the problem of how new organizations attract collective attention. Although related to legitimation, the problem of attracting attention is distinct, as attention and evaluation are distinct cognitive processes. In this study, we examine the allocation of collective attention to new organizations in a system of relationships, within which new organizations seek to attract attention through their sensegiving activities; the information properties of their sensegiving activities affect the level of attention they receive from different types of media; and media attention, in turn, increases their perceived value potential in the eyes of venture capital investors (VCs). We examine these relationships in a sample of 398 information-technology start-ups that have obtained different levels of venture capital funding. Our results show that new organizations that engage in more intense and diverse sensegiving activities attract higher levels of industry media attention and that these effects are enhanced by the human capital of their founders and leaders. Diverse sensegiving activities are also associated with higher levels of attention from the general media, but only the attention of specialized industry media is positively associated with the level of VC funding obtained. These findings extend current research on information intermediation and institutional legitimation by demonstrating that media attention early in the life of new organizations affects how they are valued by a well-informed expert audience, such as VCs. They also contribute to entrepreneurship research on the effects of new organizations’ strategies on their ability to secure resources and to research on VC funding decisions.

Purpose This paper aims to investigate the influence of financial development on non-performing loans (NPL). Design/methodology/approach The model used in this study follows the NPL model of Louzis et al. (2012), Ozili (2015) and Beck et al. (2015). Findings The findings indicate that financial development, measured as foreign bank presence and financial intermediation, are positively associated with NPLs. Also, bank efficiency, loan loss coverage ratio, competition and banking system stability are inversely associated with NPLs, while NPLs are positively associated with banking crises and bank concentration. In the regional analysis, NPLs are negatively associated with regulatory capital and bank liquidity, implying that banking sectors with greater regulatory capital and liquidity experience fewer NPLs. Practical implications National bank regulators/supervisor should not only consider the role that financial development structures play in influencing aggregate NPLs but also ensure that thorough supervision of the lending practices of banks is in place as well as the active monitoring of the financial intermediation process in the country. Originality/value The study is the first to use a global sample to examine the direct relationship between NPL and financial development.

What is the role of a country's financial system in determining technology adoption? To examine this, a dynamic contract model is embedded into a general equilibrium setting with competitive intermediation. The terms of finance are dictated by an intermediary's ability to monitor and control a firm's cash flow, in conjunction with the structure of the technology that the firm adopts. It is not always profitable to finance promising technologies. A quantitative illustration is presented where financial frictions induce entrepreneurs in India and Mexico to adopt less-promising ventures than in the United States, despite lower input prices.

Does wealth inequality make financial crises more likely? If so, how can a government intervene, and how does this affect the distribution of resources in the economy? To answer these questions, we study a banking model where strategic complementarities among wealth-heterogeneous depositors trigger systemic self-fulfilling runs. In equilibrium, higher wealth inequality increases directly the incentives to run of the poor, and indirectly those of the rich via higher bank liquidity insurance, thus increasing the probability of a systemic self-fulfilling run overall. A government intervention on illiquid but solvent banks redistributes resources towards the poor and makes systemic self-fulfilling runs less likely.

Research on bank financial intermediation in a country's narrower territorial units is scarce, in both domestic and international literature. Banks are almost the only financial intermediaries in narrower territorial units and their role is substantial, ranging from participating in regional development to the successful running of their own business. Hence, the main objective of this paper is to examine the characteristics of the financial intermediation of banks in the counties of the Republic of Croatia, both through a comparison between their economic development levels and the general presence of financial intermediation, and a more specific analysis of their deposit and credit policies. The article uses hierarchical and non-hierarchical (k-means) cluster analyses to identify relatively homogeneous groups of counties based on sets of indicators of economic environment, financial development and infrastructure and, at a more detailed level, the deposit and credit policies of banks. The research results suggest heterogeneity and diversity of bank policies across the counties and sets of indicators. Differences have been observed between developed and developing counties, as well as in approaches to banks' deposit and credit policies. The paper's findings encourage further research into these issues.

The relevance of the article’s topic is explained by the matter that Ukrainian banks, despite unfavorable macroeconomic conditions, possess significant liquidity and demonstrate a substantial positive financial outcome. Meanwhile, the pace of credit support for the economy remains low, while Ukrainian banking institutions are actively involved in the government bond market. The aim of the article is to substantiate the presence of manifestations of the financial intermediation paradox, which is reflected in the excessive activity of Ukrainian banking institutions in the government bonds market. This is proved by analyzing the activities of Ukrainian banks in the market of government debt instruments, as well as assessing their lending activity. In particular, the article provides the calculation of the credit penetration indicator, which reflects the share of loans issued by banks in relation to GDP. Against the background of a similar indicator of foreign countries in Ukraine, this indicator demonstrates an insufficient level. Even despite low economic activity and a number of problems related to the ongoing military actions, the demand for credit resources remains for certain categories of businesses. However, banks do not meet this demand for a number of objective and subjective reasons. An analysis has been conducted on the dynamics of the indicator reflecting the permissible activity of banks in the government bonds market, specifically the ratio of their investments to deposits. The limit for this indicator is set at 35%, which means that the deposit base should not be used for budgetary debt financing beyond this share. Nevertheless, in Ukraine during the analyzed period the indicator exceeded the established limit. Banks actively meet the demand in the domestic market of government debt instruments, which is verified by the ownership structure of Ukrainian government bonds. The National Bank of Ukraine also holds a significant share among the owners of government bonds. The article describes the reasons for the demand for government bonds among banks in Ukraine. A significant interest is shaped by the policy of the central bank, including the NBU’s stimulating measures, such as the ability to use government bonds as collateral for refinancing loans and to form reserves in government bonds. This accounting policy is reflected in the cost of credit services of banks and the weighted average rates on government bonds. The latter appear more significant and, considering their reliability, serve as a competitive alternative to lending to the economy. In conclusion, it is noted that the activity of banks in the government bond market may be one of the reasons for the displacement of credit activity and is a factor in the formation of the financial intermediation paradox in the banking system of Ukraine.