Bank-Based versus Market-Based Financial Systems: Effect on Financial Markets

This essay discusses the differences between the bank-based and market-based financial systems. The comparison between these two systems implicates the merits and shortcomings of each type in conjunction with the application of the competing theories of financial structure. The paper indicates that it is less advisable to distinguish which type of financial system is better than focus on the optimization of managerial efficiency and the impacts on financial markets under the distinct financial circumstances.