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I propose to discuss two interrelated issues: the role of financial institutions influencing corporate resource allocation and the requirement for forms of corporate control.
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Melissa Adair Economics, BE 104 Professor Paul Duch August 6, 2000 Cohort 01/04 I propose to discuss two interrelated issues: the role of financial institutions influencing corporate resource allocation and the requirement for forms of corporate control. The point that has to be made is that apparently "superior" performance of the "bank-based" economies need not be an outcome of the financial system, as obviously many more factors are at work here. Even more significantly, the causation may run the other way around since high growth would probably require high investment rates and hence high gearing ratios. Nevertheless, the view that banks are willing to lend more if only the firms asked them to is quite popular and it implicitly puts the blame for the unimpressive corporate performance on the managers and corporations. Other findings that stock market financed investment is more profitable to debt financed one, with internally financed projects being the less profitable of...
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