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- Title
Institutional Markets, Financial Marketing, and Financial Innovation.
- Authors
ROSS, STEPHEN A.
- Abstract
Firms and institutions are monitored and controlled through a complex set of implicit and explicit contractual relations. Because of these agency theoretic relations, institutional behavior in financial markets is not a simple reflection of the preference structures of individuals. Institutional preferences give rise to a demand for new financial instruments and innovations, even when the returns on these instruments are "spanned" in the sense of complete pricing. The innovations can be thought of as solving moral hazard problems. An agency theoretic example serves to illustrate the demand, supply, and financial marketing of stripped securities. In short, institutions matter.
- Subjects
INSTITUTIONAL market; INNOVATIONS in business; BUSINESS enterprises; CONTRACTS; FINANCIAL instruments; NEGOTIABLE instruments; FINANCIAL futures; SUPPLY &; demand; ECONOMIC demand; TAXONOMY; COLLATERALIZED mortgage obligations; BUSINESS mathematics
- Publication
Journal of Finance (Wiley-Blackwell), 1989, Vol 44, Issue 3, p541
- ISSN
0022-1082
- Publication type
Article
- DOI
10.1111/j.1540-6261.1989.tb04377.x