CORPORATE FINANCE, FINANCIAL INTERMEDIATION AND BANKING:

At one time, perhaps before the emergence of market microstructure as a rich field for research, Financial Intermediation was viewed by many as a distinct subfield of Finance, along with Corporate Finance and Asset Pricing/Investments. Although dominated by Banking, Financial Intermediation also includes studies of non-depository institutions like insurance companies, mutual funds, credit rating agencies and the like. Some would even include market microstructure. The distinctiveness of Financial Intermediation as a research area stemmed in part from the fact that it was a highly specialized area, replete with institutional detail, banking practices, and descriptions of regulations, and somewhat disconnected from the mainstream paradigm shifts that were occurring in Corporate Finance and Asset Pricing. There has been a sea change in this landscape in the past thirty years or so, a period that has not coincidentally also seen the meteoric rise in the popularity of asymmetric information and agency theory as legitimate approaches to research in Economics and Finance. In the absence of an explicit recognition and modeling of these frictions, the fundamental Modigliani-Miller irrelevance theorems relating to capital structure and dividend policy, as well as the separation theorems relating to investment and financing policy, made it difficult to eve