货币银行学An Economic Analysis of Financial Structure课件讲义

Chapter8AnEconomicAnalysisofFinancialStructure

Thischapterprovidesaneconomicanalysisofhowfinancialstructureisdesignedtopromoteeconomicefficiency.Itexplainswhyfinancialcontractsarewrittenastheyareandwhyfinancialintermediariesaremoreimportantthansecuritiesmarketsforgettingfundstoborrowers.Itexplainshowtheperformanceofthefinancialsectoraffectseconomicgrowthandwhyfinancialcrisesoccur.BasicPuzzlesaboutFinancialStructureThroughouttheworld

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stocksarenotthemostimportantsourceofexternalfinancingforbusinesses.2.Issuingmarketabledebtandequitysecuritiesisnottheprimarywayinwhichbusinessesfinancetheiroperations.3.Indirectfinance,whichinvolvestheactivitiesoffinancialintermediaries,ismanytimesmoreimportantthandirectfinance,inwhichbusinessesraisefundsdirectlyfromlendersinfinancialmarkets.4.

Banksarethemostimportantsourceofexternalfundsusedtofinancebusinesses.5.

Thefinancialsystemisamongthemostheavilyregulatedsectorsoftheeconomy.6.Onlylarge,well-establishedcorporationshaveaccesstosecuritiesmarketstofinancetheiractivities.7.Collateralisaprevalentfeatureofdebtcontractsforbothhouseholdsandbusinesses.8.

Debtcontractsaretypicallyextremelycomplicatedlegaldocumentsthatplacesubstantialrestrictionsonthebehavioroftheborrower.Animportantfeatureoffinancialmarketsisthattheyhavesubstantialtransactionandinformationcosts.Aneconomicanalysisofhowthesecostsaffectfinancialmarketsprovidesuswithsolutionstotheeightpuzzles,whichinturnprovidesuswithamuchdeeperunderstandingofhowourfinancialsystemworks.TransactionCostsFinancialintermediariesreducetransactioncoststhrougheconomiesofscaleandexpertise.EconomiesofscaleThereductionintransactioncostsperdollarofinvestmentasthesizeoftransactionsincreases.Economiesofscaleexistbecausethetotalcostofcarryingoutatransactioninfinancialmarketsincreasesonlyalittleasthesizeofthetransactiongrows.ExpertiseFinancialintermediariesarisebecausetheyarebetterabletodevelopexpertisetolowertransactioncosts.AsymmetricInformation:AdverseSelectionandMoralHazard

AsymmetricinformationOnepartyhasinsufficientknowledgeabouttheotherpartyinvolvedinatransactiontomakeaccuratedecisions.AdverseselectionAproblemfromasymmetricinformationbeforethetransactionoccurs.Thepartieswhoarethemostlikelytoproduceanundesirableoutcomearemostlikelytowanttoengageinthetransaction.MoralHazardAproblemfromasymmetricinformationafterthetransactionoccurs.Thelenderrunstheriskthattheborrowerwillengageinactivitiesthatareundesirablefromthelender’spointofviewbecausetheymakeitlesslikelythattheloanwillbepaidback.Adverseselectionandmoralhazardwillreducethedesiresofthelendersformakingloanstogoodcreditrisks.HowAdverseSelectionInfluencesFinancialStructureTheLemonsProblemPotentialbuyersofusedcarscannottellthequalityofausedcar.Thepricethatabuyerpaysmustthereforereflecttheaveragequalityofthecarsinthemarket,somewherebetweenthelowvalueandthehighvalue.Theownerofausedcarismorelikelytoknowthequalityofthecar.Theownerishappytosellhiscarifhiscarisalemon.Theownerwillnotsellhiscarifhiscarisapeach.Asaresult,veryfewgoodcarswillbeputinthemarketforsale.Buyersthereforearelesslikelytogetgoodcars.Theusedcarmarketwillfunctionpoorly.TheLemonsProbleminStockandBondMarketsThesecuritiesmarketwillnotworkwellbecausefewfirmswillsellsecuritiesinittoraisefunds.Soisthebondsmarket.Thisexplainspuzzle2----whymarketablesecuritiesarenottheprimarysourceoffinancingforbusinessinanycountry;andpuzzle1----whystocksarenotthemostimportantsourceoffinancing.ToolstoHelpSolveAdverseSelectionProblemsIntheabsenceofasymmetricinformation,thelemonsproblemgoesaway.PrivateProductionandSaleofInformationThesolutiontotheadverseselectionprobleminfinancialmarketsistofurnishpeoplesupplyingfundswithfulldetailsabouttheindividualorfirmsseekingtofinancetheirinvestmentactivities.Privatecompaniescancollectandproduceinformationforthatpurpose.Thesystemofprivateproductionandsaleofinformationdoesnotcompletelysolvetheadverseselectionproblembecauseofthefree-riderproblem.Thefree-riderproblemariseswhenpeoplewhodonotpayforinformationtakeadvantageoftheinformationthatotherpeoplehavepaidfor.Thefree-riderproblemreducestheprofitofthecompanythatproducesandsellsinformationandpreventsitfromproducingenoughinformationforthemarket.GovernmentRegulationThegovernmentcouldproduceinformationfreeofcharge.Thegovernmentcouldrequirefirmssellingtheirsecuritiesinpublicmarketstoadheretostandardaccountingprinciplesandtodiscloseinformationabouttheiroperations.Thisexplainswhyfinancialmarketsareamongthemostheavilyregulatedsectorsintheeconomy.Althoughgovernmentregulationlessenstheadverseselectionproblem,itdoesnoteliminateitbecausebadfirmshaveanincentivetomakethemselveslooklikegoodfirms.FinancialIntermediationFinancialintermediariesbecomeexpertsintheproductionofinformationaboutfirmsandmakeprofitsbymakingloanstogoodfirms.Theabilityoffinancialintermediariestoprofitfromtheinformationtheyproduceisthattheyavoidthefree-riderproblembyprimarilymakingprivateloansratherthanbypurchasingsecuritiesthataretradedintheopenmarket.Thisexplainspuzzle3and4:whyindirectfinanceissomuchmoreimportantthandirectfinanceandwhybanksarethemostimportantsourceofexternalfundsforfinancingbusinesses.Italsoexplainspuzzle6:Thelargerandmorematureacorporationis,themoreinformationinvestorshaveaboutit,andthemorelikelyitisthatthecorporationcanraisefundsinsecuritiesmarkets.CollateralandNetWorthCollateralreducestheconsequencesofadverseselectionbecauseitreducesthelender’slossesintheeventofadefault.Lendersaremorewillingtomakeloanssecuredbycollateral.Thisexplainspuzzle7:Whycollateralisanimportantfeatureofdebtcontracts.

Networth,alsocalledequitycapital,thedifferencebetweenafirm’sassetsanditsliabilities,canperformasimilarroletocollateral.HowMoralHazardAffectstheChoiceBetweenDebtandEquityContractsMoralHazardinEquityContracts:ThePrincipal-AgentProblemEquitycontractsaresubjecttoaparticulartypeofmoralhazardcalledtheprincipal-agentproblem.Theseparationofownershipandcontrolinvolvesmoralhazardinthatthemanagersincontrolmayactintheirowninterestratherthanintheinterestofthestockholders.

Theowners(principal)ofthefirmarenotthesamepeopleasthemanagers(agent)ofthefirm.Theprincipal-agentproblemwouldnotariseiftheownersofafirmhadcompleteinformationaboutwhatthemanagerswereupto.

Theprincipal-agentproblemwouldnotariseiftherewerenoseparationofownershipandcontrol.ToolstoHelpSolvethePrincipal-AgentProblemProductionofInformation:MonitoringTheownerscanengageinaparticulartypeofinformationproduction,themonitoringofthefirm’sactivities.Themonitoringcanbecostlystateverification.Costlystateverificationmakestheequitycontractlessdesirable.Thefree-riderproblemdecreasestheamountofinformationproduction.GovernmentRegulationtoIncreaseInformationGovernmentshavelawstoforcefirmstoadheretostandardaccountingprinciplesandimposestiffcriminalpenaltiesonpeoplewhocommitthefraudofhidingandstealingprofits.Howeverthesemeasurescanonlybepartlyeffective.FinancialIntermediationFinancialintermediarieshavetheabilitytoavoidthefree-riderprobleminthefaceofmoralhazard.Venturecapitalfirmisabletoreducethemoralhazardarisingfromtheprincipal-agentproblembyparticipatingthemanagingbodyofthefirmformonitoring.Itcaneliminatethefree-riderproblembecausewhenaventurecapitalfirmsuppliesstart-upfunds,theequityinthefirmisnotmarketabletoanyonebuttheventurecapitalfirm.Theotherinvestorsareunabletotakeafreerideontheventurecapitalfirm’sverificationactivities.DebtcontractsThedebtcontractismoreattractivethantheequitycontractinthesensethatitcanreducetheneedtomonitormanagers.Debtcontractisacontractualagreementbytheborrowertopaythelenderfixeddollaramountsatperiodicintervals.Theadvantageofalessfrequentneedtomonitorthefirm,andthusalowercostofstateverification,helpsexplainwhydebtcontractsareusedmorefrequentlythanequitycontractstoraisecapital.Theconceptofmoralhazardhelpsexplainpuzzle1,whystocksarenotthemostimportantsourceoffinancingforbusinesses.HowMoralHazardInfluencesFinancialStructureinDebtMarketsDebtcontractsarestillsubjecttomoralhazard.Borrowershaveanincentivetotakeoninvestmentprojectsthatareriskierthanthelenderswouldlike.ToolstoHelpSolveMoralHazardinDebtContractsNetWorthWhenborrowershavemoreatstakebecausetheirnetworthishigh,theriskofmoralhazardwillbereduced.Highnetworthmakesthedebtcontractincentive-compatible;thatis,italignstheincentivesoftheborrowerwiththoseofthelender.MonitoringandEnforcementofRestrictiveCovenantsRestrictivecovenantsaredirectedatreducingmoralhazardeitherbyrulingoutundesirablebehaviororbyencouragingdesirablebehavior.Fourtypesofrestrictivecovenantsthatachievethisobjective.

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Covenantscanbedesignedtolowermoralhazardbykeepingtheborrowerfromengagingintheundesirablebehaviorofundertakingriskyinvestmentprojects.2.

Covenantscanencouragetheborrowertoengageindesirableactivitiesthatmakeitmorelikelythattheloanwillbepaidoff.

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Covenantscanencouragetheborrowertokeepthecollateralingoodconditionandmakesurethatitstaysinthepossessionoftheborrower.4.Covenantsrequiretheborrowertoprovideinformationaboutitsactivitiesperiodically,therebymakingiteasierforthelenderstomonitorthefirm.Thisexplainspuzzle8thatdebtcontractsrequirecomplicatedrestrictivecovenantstolowermoralhazard.FinancialIntermediationRestrictivecovenantscannoteliminatemoralhazardcompletely.Itisalmostimpossibletowritecovenantsthatruleouteveryriskyactivity.Becausemonitoringandenforcementofrestrictivecovenantsarecostly,thefree-riderproblemarisesinthedebtcontract.Financialintermediarieshavetheabilitytoavoidthefree-riderproblemaslongastheyprimarilymakeprivateloans.FinancialDevelopmentandEconomicGrowthThefinancialsystemsindevelopingandtransitioncountriesfaceseveraldifficultiesthatkeepthemfromoperatingefficiently.Inmanydevelopingcountries,thelegalsystemfunctionspoorly,makingithardtomakeeffectiveuseofthesetools:collateralandrestrictivecovenants.Governmentsindevelopingandtransitioncountrieshaveoftendecidedtousetheirfinancialsystemtodirectcredittothemselvesortofavoredsectorsoftheeconomy.Theirdirectedcreditprogramsmaynotchannelfundstosectorsthatwillproducehighgrowthfortheeconomy.

Banksinmanydevelopingandtransitioncountrieshavebeennationalizedbytheirgovernments.Nationalizedbankshavelittleincentivetoallocatetheircapitaltothemostproductiveuses.Manydevelopingandtransitioncountrieshaveanunderdevelopedregulatoryapparatusthatretardstheprovisionofadequateinformationtothemarketplace.FinancialCrisisandAggregateEconomicActivityFinancialCrises:Majordisruptionsinfinancialmarketsthatarecharacterizedbysharpdeclinesinassetpricesandthefailuresofmanyfinancialandnonfinancialfirms.Financialcrisesoccurwhenthereisdisruptioninthefinancialsystemthatcausessuchasharpincreaseinadverseselectionandmoralhazardproblemsinfinancialmarketthatthemarketsareunabletochannelfundsefficiently.Economicactivitywillcontractsharply.FactorsCausingFinancialCrisesIncreasesininterestratesIfmarketinterestratesaredrivenupsufficiently,goodcreditrisksarelesslikelytowanttoborrowwhilebadcreditrisksarestillwillingtoborrow.Theincreaseinadverseselectionwillinducelendersnottomakeloans.Thesubstantialdeclineinlendingleadtoasubstantialdeclineininvestmentandaggregateeconomicactivity.IncreasesinuncertaintyAdramaticincreaseinuncertaintyinfinancialmarketsmakesitharderforlenderstoscreengoodfrombadcreditrisks.Theresultinginabilityoflenderstosolvetheadverseselectionproblemmakesthemlesswillingtolend.Thesubstantialdeclineinlendingleadtoasubstantialdeclineininvestmentandaggregateeconomicactivity.AssetmarketeffectsonbalancesheetsAsharpdeclineinthestockmarketisonefactorthatcancauseaseriousdeteriorationinfirm’sbalancesheetsthatcanincreaseadverseselectionandmoralhazardproblems.Asharpdeclineinthestockmarketreducesthenetworthofacorporationorthevalueofcollateral.Thisreducestheincentiveoflenderstomakeloans.Asharpdeclineinthestockmarketwillalsoincreasemoralhazardproblembyprovidingincentivesforborrowertoengageinriskyinvestment.Unanticipateddeclinesintheaggregatepricelevelalsodecreasethenetworthoffirms.Anunanticipatedinthepricelevelraisestherealvalueoffirm’sliabilitiesbutdoesnotraisetherealvalueofassets.Thenetworthinrealtermsdeclines.Thisincreasesadverseselectionandmoralhazardproblemsfacinglenders,thuswhichleadstoadropinlendingandeconomicactivity.Becauseofuncertaintyaboutthefuturevalueofthedomesticcurrencyindevelopingcountries,manydebtcontractsaredenominatedinforeigncurrencies.Whenthereisanunanticipateddepreciationordevaluat