The growth of financial intermediation research has yielded a host of questions that have pushed "design" issues to the fore even as the boundary between financial intermediation and corporate finance has blurred. This volume presents review articles on six major topics that are connected by information-theoretic tools and characterized by valuable perspectives and important questions for future research. Touching upon a wide range of issues pertaining to the designs of securities, institutions, trading mechanisms and markets, industry structure, and regulation, this volume will encourage bold new efforts to shape financial intermediaries in the future.

Key Features

* Original review articles offer valuable perspectives on research issues appearing in top journals * Twenty articles are grouped by six major topics, together defining the leading research edge of financial intermediation * Corporate finance researchers will find affinities in the tools, methods, and conclusions featured in these articles


Upper-division undergraduates, graduate students, professors, and professionals studying financial intermediation, in particular banking, financial systems, regulation, mutual funds, and interbank competition

Table of Contents

List of Contributors


Introduction to the Series

Section 1: Design of Contracts and Securities

Introduction to Design of Contracts and Securities

Chapter 1: The Design of Debt Contracts

Chapter 2: Subordination Levels in Structured Financing

Section 2: Market Structure and Structure of Financial Markets

Chapter 3: Limit Order Markets: A Survey

Section 3: Financial Intermediary Structure

Introduction to Financial Intermediary Structure

Chapter 4: Bank Structure and Lending: What We Do and Do Not Know

Chapter 5: Optimal Industrial Structure in Banking

Chapter 6: Commercial Banks in Investment Banking

Section 4: Mutual Funds

Introduction to Mutual Funds

Chapter 7: Performance Measurement and Evaluation

Chapter 8: The Behavior of Mutual Fund Investors

Chapter 9: Incentives in Funds Management: A Literature Overview

Section 5: Regulation

Introduction to Regulation

Chapter 10: Consolidation in the U.S. Banking Industry: Is the “Long, Strange Trip” About to End?

Chapter 11: Safety, Soundness, and the Evolution of the U.S. Banking Industry

Chapter 12: What Caused the Bank Capital Buildup of the 1990s?

Chapter 13: Basel II: A Case for Recalibration

Section 6: Competition and Regulation in Banking

Introduction to Competition and Regulation in Banking

Chapter 14: Competition and Regulation in Banking

Chapter 15: Competition and Regulation in the Banking Sector: A Review of the Empirical Evidence on the Sources of Bank Rents



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© 2008
Elsevier Science
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About the editors

Anjan V. Thakor

As the John E. Simon Professor of Finance and Senior Associate Dean of Programs at the Olin School of Business, Washington University, St. Louis, Anjan Thakor works in both academia and the business world. Prior to joining the Olin School, he was Edward J. Frey Professor of Banking and Finance at the Ross School of Business, University of Michigan, where he also served as chairman of the Finance area. He has worked with many companies, including Whirlpool Corporation, Allision Engine Co., Citigroup, RR Donnelley, Dana Corporation, Anheuser-Busch, Zenith Corporation, Lincoln National Corporation, and J.P. Morgan.

Arnoud Boot

Arnoud Boot is Professor of Corporate Finance and Financial Markets at the University of Amsterdam and Director of the Amsterdam Center for Law and Economics. He is Research Fellow at the Center for Economic Policy Research and at the Davidson Insitute at the University of Michigan.


"Boot and Thakor have done a wonderful job in putting together a collection of recent papers on financial intermediation. I particularly like their emphasis on current topics such as structured finance, bank consolidation, and Basel II regulation. A must read for anyone who wants to be informed about the current thinking in this evolving field." Luc Laeven, International Monetary Fund "Literally a tour de force with broad and deep coverage of the banking literature from a Finance perspective. A must-read for serious scholars and professionals that offers a clear and direct path to the cutting edge of current research in the field." Peter Rousseau, Vanderbilt University "Arnoud Boot and Anjan Thakor have gathered leading researchers working at the intersection of corporate finance and financial intermediation to review and synthesize the latest work in their fields. In addition to providing a concise overview of the state of the art in these important areas, the authors provide a critical assessment of the most promising avenues for future research. This text will likely prove to be an invaluable resource both for current researchers as well as new students of these disciplines." Peter M. DeMarzo, Stanford University “This book is an excellent collection of survey papers in the field of financial intermediation, written by leading researchers in the field. Given its broad coverage of topics and accessible style, it is highly recommended reading for students, teachers and professionals who want to refresh their knowledge of the literature, bring themselves to the frontier of the field, and explore open research questions.” Thorsten Beck, The World Bank