This paper examines whether the U.S. banking industry's recent consolidation trend--toward fewer and bigger firms--is a natural result of market forces. The paper finds that it is not: The evidence does not support the popular claims that large banking firms are more efficient and less risky...

When banking institutions can expand into other lines of business, some think they will diversify to reduce their total risk. Others think just the opposite. In this article, John H. Boyd and Stanley L. Graham explain the reasoning behind these two views and then test to see which one best...

We produce a theoretical framework that helps explain the co-evolution of the real and financial sectors of an economy in the growth process, as described by Gurley and Shaw. According to them, self-financed capital investment first gives way to debt finance and later to the emergence of equity...

This paper studies an environment in which the investment opportunities of agents are private information and shows that financial intermediaries arise endogenously within that environment. It establishes that financial intermediaries are part of an efficient arrangement in the sense that they...