The Emergence and Persistence of the Anglo-Saxon and German Financial Systems

Sandeep Baliga*, Ben Polak

*Corresponding author for this work

Research output: Contribution to journalReview articlepeer-review

22 Scopus citations


We use a moral hazard model to compare monitored (nontraded) bank loans and traded (nonmonitored) bonds as sources of external funds for industry. We contrast the theoretical conditions that favor each system with the historical conditions prevailing when these financial systems evolved during the British and German industrial revolutions. To study persistence, we consider an entry model where financiers take the industrial structure as given when they lend and firms take the financial system as given when they borrow. We show multiple equilibria can exist, compare equilibria in welfare terms, and discuss their robustness to coordination between lenders and borrowers.

Original languageEnglish (US)
Pages (from-to)129-163
Number of pages35
JournalReview of Financial Studies
Issue number1
StatePublished - Jan 1 2004

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


Dive into the research topics of 'The Emergence and Persistence of the Anglo-Saxon and German Financial Systems'. Together they form a unique fingerprint.

Cite this