Three Key features of our financial system
1. Loans from financial intermediaries are the most important external source of funds for small to medium sized firms... Smaller firms cannot buy directly because costs are to high and cannot sell because of adverse selection
2.the stock market is a less important source of external funds to corporations than the bond market.- most trading involves existing shares and not knew ones.- corp have been recenly buying back more stock than they have been issueing
3.Debt contracts usually require collateral or restrictive covenants- goods purchased used as collateral.-corp bonds have collateral-savers recieve higher int rates while borrowers have lowerint rates.