The role of banks in financing small and medium firms

Abstract

Up to a few years ago, economic theory did not pay any attention to the topic of firm financing. This situation has changed in recent years thanks to the development of a theorical approach that has applied the conclusions of information economics to the analysis of the working of the financial markets. The purpose of this paper is to highlight the fact that the asymmetric information approach does not constitute the only theoretical framework which gives prominence to the issue of firm financing; a meaningful theory could be elaborated on the basis of the works of Keynes and Schumpeter. The aim of this paper is to highlight the most significant differences between these two approaches.