The Modern Financial System

The dissertation, commenced from the analysis of information asymmetries in financial transaction, is dedicated to a study of the intrinsic law of the modern financial system so as to offer theoretical guidelines for the design and the reform of the financial system in our country. The modern financial theories (micro-financial theory), which are based on the basis of the economics of information (economics of contract) and the institutional economics, are employed in the dissertation as the main theoretical foundation. Approaches such as game theory, comparative economic system analysis, historical analysis and empirical analysis are adopted. Together with the analysis of the development of financial system in the developing countries and the developed countries, the dissertation explores the influences of the information technology development on the financial industry and the traditional financial intermediation theory. The exploration is also carried out in the aspects of the relations between financial crisis, financial safety net, and prudential financial regulation & supervision, the design of the financial systems and the comparison between them.The dissertation consists of five parts.Chapter one, Information Cost and Financial Intermediation, theoretically explores the information friction in financial transaction, and analyses the influences of the information technology revolution on the survival and development of banks and other financial intermediaries as well as their challenges to the traditional financial intermediation theory.Chapter Two is devoted to Information Technology and the Transformation in Financial Industry. This chapter, first, from the angle of the new financial intermediation theory, analyses the important roles banks play in decreasing the participation cost under the information technology revolution and the transformation of the key functions of banking; and second, in the analysis of economy to scale and economy to scope, explores the transformation of bank structures and their influences on the banking efficiency as well as the financial system stability.Chapter Three, Information Asymmetries and Financial System Stability, analyses the generating theory of banking crisis, the choosing of optimum financial safety net, the relations between the deposit insurance system and the financial system stability as well as how to increase the financial system stability through the design of financial regulation & supervision system.Chapter Four, Information Cost and the Financial System Structure, based on the study of the historically formation and development of different financial systems, analyses the relative efficiencies and conditions of banks and capital market in promoting the economic development, and explores the intrinsic law of the changes of financial system and their referential significance for the design and the reform of the financial system in the transition economy.Chapter Five, The Stability and efficiency of our Financial System, firstly analyses the efficiency of our financial system in the financial system structure and banking industry structure perspective; then discusses our financial system stability from the financial safety net (mainly the deposit insurance system) design and the financial regulation and supervision problems.The dissertation generalizes the following conclusions:1. The adverse selection and moral hazard led by information asymmetries in financial transaction severely restrict the operating efficiencies of the financial system, and the key economic function of banks and other financial intermediaries is to utilize the advantages of the information production to decrease the information friction in financial transaction and enhance the operating efficiencies of the financial system.2. It is an inevitable trend that the traditional information production advantages of the banks be weakened with the development of the information technology. But the banks can reduce the participation cost of the clients an...