Financial Intermediation and Strategic Management. An analytical framework for the financial intermediary development.
|Author:||Mgr. Jiří Jirka|
|Year:||2004 - summer|
|Leaders:|| † prof. Ing. Michal Mejstřík CSc.
|Work type:|| Finance and Banking
|Awards and prizes:|
|Abstract:||The master thesis develops an analytical framework for the examination of financial intermediary development. The financial intermediary is introduced as an economic participant that minimizes the demand asymmetry and the costs of a financial exchange by performing some of the operations required for the execution of the exchange. The financial intermediary is at the same time conceived as an organization consisting of strategic business units focusing on different types of financial products. The insights of financial intermediation theory explaining the financial intermediaries superiority in performing the financial operations are then used for the discussion of the organization of financial flows within the financial intermediaries strategic business units or within simple combinations of these strategic business units. To analyze the factors that determine the form and the range of financial intermediaries activities, the strategic management theory is applied to the analysis of the financial intermediaries organization of resources and activities.
There are discussed various synergies and asynergies in the financial intermediaries resources and activities, which directly or indirectly affect the financial intermediaries efficiency in organizing the financial flows. The synergies, which are structured as revenue increasing synergies, cost reduction synergies, and capabilities improvement synergies, relate to the financial intermediaries primary activities, the support activities of financial intermediaries corporate parents, and the transfer of the existing capabilities or the creation of the new capabilities within the financial intermediaries. On the other hand, the boundaries of the financial intermediaries are limited by the costs of the corporate parents functioning as the integrators or developers of the particular resources and activities and by the coordination problems and the agency problems of in large or diversified organizations. The optimal combination of financial intermediaries resources and activities is further constrained by the opportunities and the threats in their environment. As the two factors that create these external constraints of financial intermediaries are distinguished the financial participants demand for financial services and the financial infrastructure.
Although the analysis of the factors that determine the development of financial intermediaries implies that the development is dependent on the particular resources, activities, and environment of the individual financial intermediaries, and is thus considerably path-dependent, it also suggests two general tendencies. First, if a financial intermediary is not efficient in its support activities, it will be inefficient in its primary activities, regardless of its strategic focus. Second, a large number of synergies in financial organizations encourage the integration of the financial intermediation operations within the financial groups that provide a broad range of financial services.
The analytical framework is then used for a brief discussion of the strategic factors that drove the development of banks operating in the Czech transition economy in recent years. The discussion indicates that the evolving financial infrastructure, the interests and the capabilities of various banking stakeholders, who were operating in and influencing the infrastructure, and the emerging opportunities in the newly reestablished banking market were the strategic factors that determined the banking development during the transition period