Topics in Financial Intermediation

Manju Puri, Duke University, June 3- 9, 2025 at Swedish House of Finance - Stockholm School of Economics.

Description

This course coves topics in financial intermediation. This is a very large area so we need to impose some structure on what we will cover. We will start with the classic literature on banks and why they are special, the importance of relationships and hard/soft information. We then move to more recent events that has been of interest to academicians and regulators, in particular, bank runs. Who runs? How effective are mechanisms put in place to prevent bank runs such as deposit insurance and what are the
implications?

The financial intermediation landscape has changed dramatically over the last decade. We have seen the rise of FinTechs, non-bank intermediaries, payment firms along with new payment mechanisms such Buy-Now-Pay-Later. Alongside is the potential introduction of Central Bank Digital Currencies (CBDCs). And geopolitics that are affecting the financial landscape. There is relatively little research on some of these new developments. We will examine some of these developments in the context of recent research.

Students are encouraged to read the relevant papers, participate in the class discussion, and to come up with their own research ideas. In the last session, students will be asked to present research proposals in class.

Outline

June 3rd	- Room A536, 09:00 - 13:15
	- Classic foundations of banking. Why are banks special? Screening/Monitoring; Relationships; Hard/Soft information.
	- Bank Runs – Deposit outflows/inflows. Who runs?
June 4th	- Room A536, 10:15 - 12:00 and 13:15 - 15:00
	- The rise of FinTechs; Digital footprints and alternative credit scoring mechanisms
	- Digital Payments with Open payments, and customer driven data sharing
	- BNPL- What are the underlying economics?
	- The rise of payment firms, CBDCs, and geopolitics
June 9th	- Room A538, 10:15 - 12:00 and 13:15 - 15:00
	- Student presentations of research proposals

Readings

Banks in Capital Markets, Bank-firm and bank-depositor relationships, Soft and hard information, organization form, disintermediation.

• Berger, Allen N., Nathan H. Miller, Mitchell A. Petersen, Raghuram G. Rajan, and Jeremy C. Stein, 2005, “Does function follow organizational form? Evidence from the lending practices of large and small banks” Journal of Financial Economics 76:2, 237-69.

• Diamond, D. 1991. Monitoring and Reputation: The Choice Between Bank Loans and Directly Placed Debt. Journal of Political Economy, 99, 689-721.

• Drucker, Steve, and Manju Puri, “Banks in Capital Markets,” chapter in Empirical Corporate Finance, ed. by E. Eckbo, Handbooks in Finance, North-Holland Publishers, 2007, 189-232.

• Drucker, Steve, and Manju Puri, “On loan sales, loan contracting and lending relationships,” forthcoming, Review of Financial Studies.

• Drucker, Steve, and Manju Puri, “On the benefits of concurrent lending and underwriting,” Journal of Finance, 2005, 60(6), 2763-2800.

• Fama, E. 1985. What's Different About Banks? Journal of Monetary Economics, 15, 29-39.

• Hellmann, Thomas, Laura Lindsey, and Manju Puri “Building relationships early: Banks in venture capital,” Review of Financial Studies, 2008, 21(2), 513-541.

• James, C., 1987, “Some Evidence on the Uniqueness of Bank Loans,” Journal of Financial Economics, 19 (2), 217-235.

• Liberti, Jose., and Mitchell Petersen “Information: Hard and Soft,” Review of Corporate Finance Studies 8, March 2019.

• Petersen, Mitchell A., and Raghuram G. Rajan, “The Benefits of Lender Relationships: Evidence from Small Business Data,” Journal of Finance, March, 1994, Volume 49, pp. 3-37.

• Stein, Jeremy, C., 2002, Information production and capital allocation: Decentralized vs. hierarchical firms, Journal of Finance, 57, 1891-1921.

Bank Runs

• Iyer, Rajkamal and Manju Puri, “Understanding Bank Runs: The Importance of Depositor-Bank Relationships and Networks,” 2012, American Economic Review, 102(4): 1414-1445.

• Rajkamal Iyer, Manju Puri and Nick Ryan “A Tale of Two Runs: Depositor Response to Bank Solvency Risk,” Journal of Finance, 2016, 71(6), 2687-2726.

• Kristian Blickle, Markus Brunnermeier, Stephan Luck, “Who Can Tell Which Banks Will Fail?” Review of Financial Studies, 2024, Volume 37(9), 2685–2731.

• Chris Martin, Manju Puri, Alex Ufier, "Deposit Inflows and Outflows in Failing Banks: The Role of Deposit Insurance," [SSRN link] forthcoming, Journal of Finance. 

 

New Developments in Financial Intermediation

• Tobias Berg, Valentin Burg, Ana Gombović and Manju Puri, “On the rise of FinTechs: Credit scoring using digital footprints,” Review of Financial Studies, 2020, 33(7), 2845-2897.
•  Tobias Berg, Andreas Fuster and Manju Puri, “FinTech Lending,” Annual Review of Financial Economics 14, 187-207, 2022.
• Shashwat Alok, Pulak Ghosh, Nirupama Kulkarni, and Manju Puri, “Open Banking and Digital Payments: Implications for Credit Access?” [SSRN link]
• Tobias Berg, Valentin Burg, Jan Keil and Manju Puri, “The Economics of “Buy Now, Pay Later: A Merchant’s Perspective [SSRN link], forthcoming, Journal of Financial Economics.
• Tobias Berg, Jan Keil, Felix Martini, and Manju Puri, "CBDCs, Payment Firms and Geopolitics." [SSRN link]

 

Course credit 

3.75 ECTS