A widely recognized paper by Colin Mayer (1988) has led to a profound revision of academic thinking about financing patterns of corporations in different countries. Using flow-of-funds data instead of balance sheet data, Mayer and others who followed his lead found that internal financing is the...

A financial system can only perform its function of channelling funds from savers toinvestors if it offers sufficient assurance to the providers of the funds that they will reapthe rewards which have been promised to them. To the extent that this assurance is notprovided by contracts alone,...