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Financial Disintermediation and Financial Fragility

Author

Listed:
  • Kosuke Aoki

    (The University of Tokyo)

  • Kalin Nikolov

    (European Central Bank)

Abstract

This paper investigates how expanding the corporate bond market and the shadow banking sector affect the susceptibility of the financial system to crisis. We show that the corporate bond market can increase banking fragility although it also diminishes the impact of banking crises. Shadow banking allows higher financial system leverage and thus increases bank risk taking and fragility even further. Because it relies on bank capital for its operations, the shadow banking sector provides no funding diversi cation and cannot offset the real economy impact of a banking crisis.

Suggested Citation

  • Kosuke Aoki & Kalin Nikolov, 2015. "Financial Disintermediation and Financial Fragility," CARF F-Series CARF-F-374, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    • Handle: RePEc:cfi:fseres:cf374
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    File URL: https://www.carf.e.u-tokyo.ac.jp/old/pdf/workingpaper/fseries/F374.pdf
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    References listed on IDEAS

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    Cited by:

    1. Chen, Guojin & Liu, Yanzhen & Zhang, Yu, 2020. "Can systemic risk measures predict economic shocks? Evidence from China," China Economic Review, Elsevier, vol. 64(C).
    2. Thomas Lejeune & Raf Wouters, 2019. "A macroeconomic model with heterogeneous and financially-constrained intermediaries," Working Paper Research 367, National Bank of Belgium.
    3. Giannetti, Caterina, 2019. "Debt specialization and performance of European firms," Journal of Empirical Finance, Elsevier, vol. 53(C), pages 257-271.
    4. David Rappoport & Alexandros Vardoulakis & David Arseneau, 2015. "Secondary Market Liquidity and the Optimal Capital Structure," 2015 Meeting Papers 1274, Society for Economic Dynamics.
    5. Kühnhausen, Fabian & Stieber, Harald W., 2014. "Determinants of Capital Structure in Non-Financial Companies," Discussion Papers in Economics 21167, University of Munich, Department of Economics.
    6. Giannetti, Caterina, 2015. "Debt Concentration of European Firms," LEAP Working Papers 2015/3, Luiss Institute for European Analysis and Policy.
    7. Giannetti, Caterina, 2015. "Debt concentration of European Firms," MPRA Paper 63002, University Library of Munich, Germany.

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