985数量经济与金融系列讲座第161期：Is the Banking Sector Too Big?

题目：Is the Banking Sector Too Big?

主讲人：Wang, Tianxi, Lecturer, University of Essex

Abstract

The paper presents a model of signalling through bank financing, in which the bigger the bank loan a project obtains, the lower the book rate of the deal and the higher the projects quality signaled, capturing well empirical findings. Based on the model, the paper examines the effects of the banking sector size when banks. ability of discerning risks is not given but invested. The paper shows that so long as ex post risk shifting is contained, (a) banks over-invest in the ability; (b) the bigger the banking sector, the lower the investment; therefore the sector is never too big; (c) but the bigger the sector, the riskier its assets, because the lower investment the worse the risk discerning ability. The paper suggests that a universal payment cap upon the financial sector could improve social efficiency.