It is generally observed that financial systems around the globe perform similar functions, yet when we examine them closely we

It is generally observed that financial systems around the globe perform similar functions,  yet when we examine them closely we Essay example
Masters
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Finance & Accounting
Pages 8 (2008 words)
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Name…………………………………………………………………………….xxxxxx Institution……………………………………………………………………….xxxxxx Course……………………………………………………………………………xxxxx Professor………………………………………………………………………….xxxxx @2012 Financial system Introduction It is important to understand how financial markets work…

Introduction

Secondly, through which lenders supply money is through financial intermediaries such as the banks, mutual funds, market funds, pension funds and insurance companies (Allen and Santomero 1997 pg 1461). Financial systems play an important role in the economy. First, they eliminate information problems between investors and borrowers by monitoring and ensure that depositors’ funds are in the proper use. Secondly, they spur up economic growth. They provide intertemporal smoothing of non-diversifiable risk at a given time as well as insuring depositors against consumption shocks. They play an important role in corporate governance, considering that most countries experience the agency problem. Different role vary across countries and times, but banks always play a critical role in the financial system (Allen and Santomero 1997 pg 1461). It is vital to understand the role of the financial system. Role of the banks in bank-based system and market-based systems a) Informational problems Market based systems eliminate informational problems. You find that most information is publicly displayed in the market for public listed companies. ...
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