Universal Banking and the Development of Secondary Corporate Debt Markets: Lessons from 1830s Belgium
40 Pages Posted: 9 Jan 2011
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Universal Banking and the Development of Secondary Corporate Debt Markets: Lessons from 1830s Belgium
Universal Banking and the Development of Secondary Corporate Debt Markets: Lessons from 1830s Belgium
Date Written: January 5, 2011
Abstract
This paper proposes a reassessment of the old-age debate on universal banking and growth by putting it on a different plan. Modern financial economics are used to provide new theoretical foundations to Gerschenkron’s (1962) hypothesis: universality is interpreted as a strategy for banks to reach the critical size needed in order to perform successful securitization of corporate debt. A relevant natural experiment in universal banking and industrialization (Belgium in the 1830s) illustrates the argument. The conclusion is that creating a new financial market also implies establishing intermediaries to supply crucial functions such as underwriting, certification, and liquidity provision.
Keywords: Universal banking, stock markets, intermediation, financial development
JEL Classification: G24, G32, N23, O16
Suggested Citation: Suggested Citation